Session 2010-11
Publications on the internet

CORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 792-iii

House of commons

oral EVIDENCE

TAKEN BEFORE THE

Culture, Media and Sport Committee

Football Governance

Tuesday 8 March 2011

David Gill, Peter Coates, Tony Scholes and Niall Quinn

Lord Mawhinney and Henry McLeish

Evidence heard in Public Questions 148 - 246

USE OF THE TRANSCRIPT

1. This is a corrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.

2. The transcript is an approved formal record of these proceedings. It will be printed in due course.

Oral Evidence

Taken before the Culture, Media and Sport Committee

on Tuesday 8 March 2011

Members present:

Mr John Whittingdale (Chair)

Ms Louise Bagshawe

Dr Thérèse Coffey

Damian Collins

David Cairns

Paul Farrelly

Jim Sheridan

Mr Adrian Sanders

Mr Tom Watson

________________

Examination of Witnesses

Witnesses: David Gill, Chief Executive, Manchester United, Peter Coates, Chairman, Stoke City, Tony Scholes, Director, Stoke City and Niall Quinn, Chairman, Sunderland, gave evidence.

Q148 Chair : Good morning, everybody. This is a further session of the Culture, Media and Sport Select Committee inquiry into football governance. I would like to welcome this morning David Gill, the Chief Executive of Manchester United; Peter Coates and Tony Scholes, the Chairman and Chief Executive of Stoke City; and Niall Quinn, the Chairman of Sunderland FC.

Dr Coffey: Mr Coates, why did you decide to become a football club owner and what encourages you to keep pumping money into your club?

Peter Coates: I am a Stoke boy, I have supported the club since I was a boy and I have had two comings at Stoke-an early one in 1985, after which I sold the club to an Icelandic consortium and then bought it back again in about five years ago this summer. I bought it back again against my better judgment, in some ways, and my family’s, who all thought I was daft to do it. The club was in a mess at the time and I thought I could help it and do things for it, and I was a bit disappointed with my previous time, a there was little bit of unfinished business about it and all that sort of thing. But I thought it would be important for the area if the football club were doing well. Stoke was having a difficult time. It has lost the pot banks and the mining industry. I thought that if Stoke could get in the Premier League it would give the place a lift and would be good for it. I think that that has happened, I am pleased to say.

Q149 Dr Coffey: Would you say it is a kind of philanthropy that you do as opposed to, say, putting money into the Potteries Museum or-

Peter Coates: There is an element of that, because I don’t expect to make any money out of it. I do not think you can make money out of football at Stoke’s level. I think you can at a certain level, but not at the level of a club of our size. I think it is almost impossible, but obviously I enjoy it as well. Obviously football is important to me and I enjoy it when we win, yes.

Q150 Dr Coffey: Let me come across to Mr Quinn. What inspired you to get that consortium together to form Sunderland?

Niall Quinn: I suppose that the potential of the club had not been reached. Having been a player there and having seen the journey going really well and then having come to a shuddering stop, I felt something. "Unfinished business" is probably not the correct term, but I felt at the time of my departure that things were not done properly. I bore that for a couple of years in my mind. I worked as a journalist and in TV, and the opportunity came to go back and-Peter said the same thing-to make the place go and reach its potential and work, and therefore the spin-off was the region would benefit. My belief was that the football club that I was involved with, which had won one trophy since the war, was managing to have 47,000 people at matches when it was about to be relegated. How good could that be if we got it up? Could we become a much bigger force? That is what drives me, and it still drives me today. That is the reason I came, although I also came because I had had such a good time as a player there. I had played for big clubs-Arsenal, Manchester City-but I never had the same feeling of potential and collectiveness between fan and club as I did at Sunderland, so I am trying to push that on.

Q151 Dr Coffey: So for Stoke or Sunderland, what are your aspirations or targets as owner and chairman?

Peter Coates: To stay up.

Dr Coffey: To stay in the Premier League?

Peter Coates: That is it, yes. We want to move on from there, obviously, but the truth is for us staying up is a considerable achievement and that is what we have to do year in, year out. It is immensely difficult. It is hugely competitive and in every game we play, we do not know whether we are going to win at all. Every game is difficult and is a battle, but that is what we are there for.

Q152 Chair: Can I just follow that up? To what extent does it matter to you that your two clubs-we will leave Manchester United for the moment-realistically do not stand any chance of winning?

Niall Quinn: If I went to a fan’s forum and said that, I would be chased out of Sunderland. We have to believe that we will make progress. We started the Premiership journey a couple of years before Stoke and we are now beginning to feel, with the investment and the policy that we have and the way the club is run, that we can look at playing European football at the Stadium of Light. That has to be the next realistic target for us now. I would like a few more points on the board this year. We are not mathematically safe at this moment in time, but we are up in eighth place in the Premiership. We are looking to a consistent run of top 10 finishes which allows us to join the Evertons and Aston Villas-Tottenham and Man City seem to have moved on a level lately. I am of the opinion that there is a top half of the league. Initially, there was the top four, who everybody thought was impregnable, and City and Spurs seem to be doing something about that. Everton and Aston Villa were the next clubs and we would like Sunderland to be part of that group. That is a realistic target for us and if a cup competition came along-

Q153 Chair: That is not winning. It is playing in Europe, which is an aspiration. You say that your fans want to believe, but do they actually believe that one day Sunderland could win the Premier League?

Niall Quinn: Win the Premier League? I guess they do not. I guess they don’t, but what they expect of me and expect of everything that is drilled down to our club is that when Manchester United come to town, that we give them a game, and we have done this year, and when Arsenal have come to town we have given them a game. That is what keeps us going. There is only one winner every year, but there are three people who burn, and lots of disgruntled fans. We love this Premier League so much. The world loves it. Sunderland itself loves it. It is vital to be in it, and in itself that is good success.

Q154 Chair: Is that the same in Stoke?

Peter Coates: We try to get better every year. We think that the longer we stay in, the better we will get, because knowledge and infrastructure will be improved. Also I think that there is some evidence that the longer someone stays in, the better chance they have of staying in. We want to get better every year and I suppose the first thing would be to become a solid Premier League club-one that does not have to worry quite as much about relegation. The truth is that probably 12 or 14 clubs have that concern at the start of the season. If the number is 12, say, there will be a 25% chance of being relegated. Those are quite high percentages, but equally we play some of the best clubs in the world. We play Manchester United, and we play Arsenal and Chelsea and other such clubs. They are world-class clubs. That is good for Stoke City and it is great to have them in the city. Playing with them is great, and we like to give them a game-and usually we do. We do not play them thinking we are going to lose. We play them hoping that we are going to beat them and certainly give them a good game. I think that means a lot to the supporters.

Q155 Chair: But realistically that is the height of your aspiration, to stay up in the Premier League and to regularly play against Arsenal and Manchester United?

Peter Coates: No. We have a big game on Sunday; we play West Ham and we could get into the semi-finals of the FA Cup. It will be great if we do that. That is further progress. We have not done that for 40 years, so it would be excellent. There are things for us to go for, and the higher up the better. One day we might have a terrific season and play in Europe. You do not know, but we are trying to get better all the time.

Niall Quinn: It is possibly worth noting that when we play Championship football, our fans are not as invigorated and as in love with their club as they are when we are in the Premiership. When you make the comparison you sound as if it is deflatory to not be able to win, but on being in the Championship or Premiership, ask our fans. There is only one place to be.

Q156 David Cairns: Mr Gill, I have a general question. What do you think are the biggest challenges facing you as the Chief Executive of Manchester United?

David Gill: If you look at the level of the club, you will see that we have always had the team as our focus. Everything we have done has been about how successful the team has been. The challenge for us is making sure that we have the best team on the pitch. We have to make sure we have the best manager. Obviously, Alex Ferguson will retire in due course. The replacement for that is clearly a key business decision-

David Cairns: Feel free to tell us who it will be now if you like.

David Gill: Those are the key things, but obviously we want to make sure that we play a role in the development of football generally. We need to have competitive games against Stoke and Sunderland, for example. We need to ensure that it is a competitive game. We need to make sure that the English game develops and continues to be as successful as it has been so that we can benefit from that. We play within a game. We cannot go and buy five other clubs so that there are only 15 in the Premier League every year. It starts with 20 teams. We start in the third round of the FA Cup, the opening stages in Europe and so on. The biggest challenge is to ensure that the team remains successful, and our goal is to be the best team in the world, both on and off the pitch-things which are clearly interrelated.

Q157 David Cairns : As Chief Executive, on a day-to-day level, how large does the debt loom in your management of the club as a business?

David Gill: It doesn’t. The debt level that we have is £500 million in gross terms. There is roughly £130 million in cash in the bank at the moment, so there is a net debt of £370 million. We have gross interest costs per annum in the order of £45 million, and our cash profits are around about £100 million. So we have more than two times interest cover. The bonds that we have in place are covenant light-in other words, we do not have quarterly reporting in terms of covenants and so on-and we are very comfortable with that. We have seen great growth in the last five years in terms of our turnover. Also it is a profitable business if you get it right and that has generated cash profits. From my perspective, we know that the debt is there but it doesn’t impact on what we do. We look at trying to grow our revenues and invest in the business to make sure that we can continue to expand and be successful.

Q158 David Cairns: We are going to talk about debt financing in more general terms a bit later on. It does not impact on what you do, but surely servicing that debt, and interest payments and fees and all the rest of it, are money that is not being spent on players or improvements of the facilities or whatever?

David Gill: No; let us look at improvements to facilities. We have spent a lot on Old Trafford in the last few years. We have just had approved a £13 million improvement to our training ground, which has been open 10 years, upgrading it to reflect what has happened in football in the last decade. There has been no impact in terms of our transfers.

Q159 David Cairns: But you would rather you did not have this debt, presumably?

David Gill: Well, not having the debt is one thing, but the other point to note is what the owners have brought in terms of growth in certain aspects. For example, when they bought the club they saw lots of opportunities on the commercial side. Our commercial revenues in 2006, the first year after ownership, were £40 million. Last year, to June 2010, the amount was £80 million; this year it will be over £100 million. So they have grown that. We have invested in people. We had 460 employees then and we have 600 now. Yes, in answer to your question, simply the amount is £45 million. If that was not there it would be better in some respects, but at the same time it is not hampered us in developing the club. The net spend on players since the owner has taken over is greater than in the five or six years before that.1

Q160 David Cairns: I am sure that that is true, but there can’t be any ambivalence about this. Obviously it would be much better if Man United was not carrying those levels of debt and servicing them, surely?

David Gill: In isolation, yes, but there is no issue in terms of asking whether Manchester United has been hampered in terms of what we have had to do as a club in respect of investing, as you quite rightly say, in facilities, players or player contracts. I personally believe that there has been no impact in that respect.

Q161 David Cairns : What kind of communication do the owners make with you in terms of setting out their strategy and so on? How do they communicate that to you? How do they set out their vision for the club on a year-to-year basis?

David Gill: We have both annual budgets and five-year plans, and we have constant dialogue in board meetings, in calls and so on. That speed of decision has been very positive, and I think that they have taken a view on longer-term investment which perhaps we would not have undertaken if we had been a quoted company. Who is to say? But that is the view, so I think they are intricately involved. As I said to you earlier, they clearly saw the commercial opportunities for Manchester United. They liked how the Premier League was run. They thought it was a very well-run league in comparison, say, with some aspects of the NFL. They felt that they could use the strength of the Premier League, but also the strength of Manchester United, to push the club forward. I think that they have demonstrated they can do that.

Q162 David Cairns : Would you prefer it if they were able to demonstrate that to the fans? There is clearly a breakdown in communication somewhere. The fans say that the Glazers do not talk to them, and they are not getting the positive message that you are getting.

David Gill: The owners have delegated to me-to the team that we have, and to Alex Ferguson and so on-the task of doing that. That is a model that other owners have copied within the Premier League. I can give you other examples where owners have not spoken directly to the fans. The sheer size and nature of Manchester United perhaps means that we get more coverage on such matters, but as an executive team, on behalf of ourselves and the club, and so on, we have extensive communications with our fans. Yes, we do not communicate with certain fan groups, but they have an avowed aim to change the ownership. It would be slightly strange to enter into dialogue with those groups who have that intention or that objective. I am not sure where it is going to lead. We have to take all those elements of fan communication very seriously.

Q163 David Cairns : Why do you think so many of the fans just simply loathe the Glazers?

David Gill: You say "so many." They are well organised. They are very domestic. We have done studies which show that we have 333 million followers around the world. Our mailbags are large. We get thousands of e-mails; we had 36,000 phone calls last month. Not everyone hates the owners. The success that we have delivered on the pitch in the last five years is significant. There have been seven trophies since they have taken over. A lot of the fans want to ensure that there is money to spend on the team. They want to come to a safe modern stadium and see exciting, attractive football-and I think we have delivered on those counts.

But that has always been the case. Looking at Manchester United pre the Glazers, when we first went public in 1991, a lot of fans did not like the club at that time. We couldn’t understand why it was. The share price dropped. They didn’t buy the shares, then it went back up. They loathed the Edwards family. There are a lot of examples, not only around this table but across the Premier League, of fans who do not like the owners or management. That is one of the strengths of football. It creates opinion.

Q164 David Cairns: The situation of Man United in relation to the Glazers is no different to any other club?

David Gill: I am not saying it is no different. The size of Manchester United and the coverage means that perhaps it is magnified, but without doubt, there are issues at other clubs. You just have to read the papers or watch the television to understand that.

Q165 David Cairns: Mr Scholes, I have a similar question for you. What are the biggest challenges facing you in your job?

Tony Scholes: The No. 1 challenge, as Peter has just said, is putting a team out on the pitch that is good enough and competitive enough to stay in the Premier League-to stay in the best league in the world. Bearing in mind that we were out of the top league for 23 years, when we got promoted in 2008 we were some distance behind everyone else. By keeping the team in the Premier League we were able to build the club up, to build the support base and to pick up on those lost generations, if I can put it that way, derived from our being out of the top league for 23 years. Being in the Premier League gives us the opportunity to do that. The No. 1 objective is to stay in the Premier League, and doing that enables us to fulfil our objectives, which are to build a support base and the infrastructure of the club, and ultimately to build a sustainable Premier League club.

Q166 David Cairns: In day-to-day terms, what would you characterise as the main difference between being in charge of a football club in the Championship and being in charge of one in the Premier League?

Tony Scholes: I guess that running a football club is the same as running any company in many respects. You have to know what your objectives are, and you have to have good management to achieve those objectives. That is the same in the Championship and the Premier League. The differences, of course, come from the fact that we are playing in the biggest and best league in the world and the money that that brings with it. Obviously our income level went up substantially. That makes some things a lot easier, but it also brings some new challenges. Perhaps one of the key challenges is always managing the downside as well, so that if things do go wrong, we are strong enough to come back.

Q167 Ms Bagshawe: What do you think makes Premier League clubs so attractive to foreign investors? Could we start with you, Mr Gill?

David Gill: You are quite right; it is admired around the world. The way the league is structured is a factor, and it has clear objectives. The collective selling of the television rights has clearly been a success and it has made things more competitive.With regard to how the league is organised, there is light-touch regulation from the centre of the league but also an understanding what the commercial parameters are. The clubs get on very well. We all support the collective selling. We understand that strength behind that. Within that we have seen a sport that is growing. The sheer interest of this Committee shows that, and what is happening in football around the world, whether in the World Cup, the Euro or the Champions League. We are the most admired league in the world. We travel a lot with the club. Our following in Asia, and also in North America, is fantastic. If you ask all those people what their favourite league is, it is the Premier League, because the Premier League is one of the best leagues in terms of selling those rights on a collective nature in those markets. You can pick up all the teams, all the games and it is a very positive thing. So I think the time was right with the advent of satellite television. The league plays exciting football and it has attracted a good mix of foreign players-top, top players. All those factors coming together in a growing industry has meant it has become attractive.

Q168 Ms Bagshawe: Mr Coates, you took a club back out of foreign ownership. What do you think made something like Stoke so attractive in the first place to foreign investors?

Peter Coates: What?

Ms Bagshawe: You took a club out of foreign ownership by buying it back.

Peter Coates: They wanted to go because they had lost their money and that happens a lot in football.

Ms Bagshawe: Whether they decided to sell it or they didn’t, but what do you think they-

Peter Coates: They were desperate to go.

Ms Bagshawe: What do you think attracted them to it in the first place?

Peter Coates: They thought they could make it work. They thought they could take Stoke into the Premier League. That was their objective. They thought they had a manager, an Icelandic manager, who could do it. They were confident. Iceland, if you remember, was doing rather well and growing and taking over the world and one of the first things they took over was Stoke City. They found it was much more difficult than they thought. Foreign owners come in and it is immensely difficult. It is the best league in the world and it is the most international league and that is why it attracts foreign owners, because of its international dimension. It attracted even small Iceland, which is a population less than Stoke. They thought they could make it work and do well. I remember it very well. They had a bit of money to spend; they thought they would have a bit of fun, enjoy it and make some money, because they thought they were going to get into the Premier League. Of course, they discovered how difficult it was. It is an immensely difficult industry to work in. You have immense pressure from the media, immense pressure from your supporters and it is a tough business.

Q169 Ms Bagshawe: Mr Quinn, what do you think?

Niall Quinn: I suppose the example of Sunderland would be, again, one where the owner has bought into the potential. One of the first things I asked him to do was understand the emotion of our football club, and I think that is the area where foreign owners, through the lack of PR or whatever, sometimes have an issue where people do not understand where they sit in terms of their love and affection for the club. I would say one of the issues-it is not my issue but Manchester United’s-is the people do not really know how the Glazers feel deep down in their hearts about when a referee makes a bad decision. Do they go home really fed up after a game like we all do or are they taking the call from the golf course wondering how the team got on today? I think that is the thing that is out there.

I know that is not true, of course, and in our case it is especially not true. One of the great things about our owner, which is appreciated by our fans, is he has more than bought into the emotion of it. He has bought into it financially, but also in terms of his week being a bad week, no matter what he is doing, if the club has not done well. I think that is a measure of his involvement at the club.

The other good thing is he lets football people run the football side of it. There is trust in the air, and it is to get the fans in Sunderland to believe that, which makes our team-which is fans, work force, players, and of course our owner, and our board-know that we are all pulling in one way. That is a tough ask and nobody is more aware than me of how foreign ownership is mistrusted. In our case it is not; it is welcomed with open arms. In selling the club to Mr Short and selling the idea of the club, for somebody in that bracket as he was at the time it seemed a great story, a great adventure to go on. These people are winners. They like to see can they improve it. If I can marry that in with the fans’ approval, then we have a good formula.

David Gill: I can assure this Committee that our owners have had a very bad week.

Q170 Ms Bagshawe: In terms of restoring some of that trust with the public and foreign ownership and in terms of governance, do you as a panel think that the Premier League is making sufficient inquiries of foreign investors before they purchase a club? Do you think there is enough due diligence going on? Mr Quinn, we will start with you on that one.

Niall Quinn: It is interesting. I can think of one or two cases in the past where there was a media outcry on people who were involved with clubs. It involved fit and proper persons, as they were called, and the issues came into the public forum. Basically what I can say is that in the period over the last few years-post Portsmouth’s demise, post other things that have happened-that has really tightened up now. I think we are confident and we know that the Premier League have tightened that up and shifted that to a point. Without going too deeply into it, there is now an international company that covertly will find out everything they need to know about somebody coming into the game.

Ms Bagshawe: Associates, is it?

Niall Quinn: We can’t tell anybody who it is. That needs to be understood on the basis that if we were to turn around and stop somebody who can invest in other business in the country from investing in our business, could they sue us?

Tony Scholes: One of the things that is worth saying, I think, is that in football most things get into the media immediately. There is very little we do that does not get reported on the following day. This is an area that doesn’t. There have been a number of people who have wanted to take over football clubs but have been prevented from doing so because of the Premier League’s rules that never get into public exposure.

Q171 Ms Bagshawe: Are you prepared to name one of them?

Tony Scholes: To be honest with you, I don’t know them either. That is the Premier League’s job. We are aware that there are a number but that is their job to do that; to have a look at them and to vet people who want to take over clubs.

Q172 Mr Watson: Were the Glazers vetted?

David Gill: Were they vetted? They went through the process. Not to the extent that both Niall and Tony have said. I think there are two things here: one is that the Premier League has learnt from certain situations. We learnt from the Portsmouth situation and we, as a group of clubs, all supported wholeheartedly the recommendations from the Executive to improve the rules in terms of financial information and so on going forward. As Niall and Tony have said, in terms of the vetting of owners, that has been improved. I think it is important for industry and for sport to learn from past issues and to look them.

I do not think that, regarding the attractiveness of English football versus other football and English business perhaps versus British business and other business, passport is an issue. You can have very bad British owners or very bad English owners. It is the ability of the people coming in, their aspirations for the club and the objectives of the club that matter. So I think we should shy away from saying it is a passport issue and saying that you can only be English in order to be a proper owner of a football club, because I don’t think that is true. It is much more about the right owners than about their passport.

Q173 Mr Watson: Am I right in saying that Manchester United, the actual company that is Manchester United, is now resident in Delaware in the United States?

David Gill: That is one for the owners. Manchester United Limited, is clearly a UK company. The football club is a UK subsidiary of that. As to the ultimate owners, that might be the case. Where is the ultimate owner of Chelsea Football Club or-

Mr Watson: I don’t know, where are they?

David Gill: It doesn’t matter, because my job as the Chief Executive of Manchester United is to run the club according to our own financial structures, to ensure we continue to compete at the highest level of the game. The ultimate ownership up there is something for the owners. But what I would say is they have confirmed-and the Premier League checks this-the ultimate owners of Manchester United, 100%, are the Glazer family.

Q174 Mr Watson: My point is, though, that don’t you think there should be some national embarrassment that a great English club like Manchester United is owned in Delaware?

David Gill: Not at all. Manchester United Limited publishes its accounts every quarter of every year. I am not quite sure why they would be an embarrassment as long as the company is operating properly within a great competition. I think Manchester United should be a source of pride for England, in terms of what it does and has done within the Premier League, and in terms of its performance and importance to the economy. We understand football is very important to the economy of the United Kingdom, and to the social fabric, and we act responsibly within that. So I don’t think it is an embarrassment in any way, shape or form.

Q175 Mr Watson: I am sorry to make this about Manchester United, but just on the point about the due diligence, the secret organisation that vets potential buyers-

Niall Quinn: It is a law firm.

Mr Watson: Yes, law firm. Can I just ask, would you be confident that the Glazers would pass that new test today were they buying the club?

David Gill: Without a doubt.

Mr Watson: Without a doubt. Okay, thank you.

Q176 Jim Sheridan: Just on this point, do you think it is fair to your supporters that there is some sort of secret organisation that vets-

Niall Quinn: It’s not a secret organisation. It is a law firm; sorry, I beg your pardon.

Jim Sheridan: We are getting closer; it is now a law firm.

Peter Coates: I think it is a specialist in that sector. It is something I wanted them to do because I felt if we were to improve the fit and proper person test, you want to make sure it is properly vetted and I thought a specialist company would be the best way to do it.

Q177 Jim Sheridan: Did you not think it would be helpful to share that experience, that information, with your supporters?

Niall Quinn: Just on that point again-

Jim Sheridan: Aren’t they entitled to know what kind of person is owning the club?

Niall Quinn: Yes. Where there are certain people that this firm did not want involved, we couldn’t make that public, because those people could maybe have come along and tried to sue us.

Q178 Jim Sheridan: Are you aware of any other industry discipline that behaves like this?

Niall Quinn: In terms of trying to get to the best possible result for the fans?

Jim Sheridan: People don’t know what kind of person owns the business.

Niall Quinn: I think they do. We obviously pass.

David Gill: The point here is that ultimately it becomes clear what this process is. There might be five people bidding for a club, and I think what the Premier League has done is institute quite proper procedures to look at various things regarding the appropriateness of that takeover, whether it relates to the actual person in terms of his past business dealings or past issues, or to their business plans, which will involve asking whether they have the finances and objectives to take the club forward. That will mean looking prospectively from a financial perspective. So out of that five-they vet five-three might pass the test, and for them it then becomes a bidding situation in terms of who gets the club. The other two might be failed and we as clubs and supporters don’t need to know who the Premier League has turned down. I think it is more appropriate for the organisation controlling the league to do that.

Tony Scholes: It is a very positive thing because the league in football has been criticised in the past for allowing people to take ownership of clubs which are very important institutions, allowing the wrong people to do so. So they have implemented what started as the fit and proper persons test and it has been strengthened as a result of learning from some incidents that happened in the past. They have got an independent firm in. Recognising they didn’t necessarily have skills to do that themselves, they got an independent firm in to vet those people. So the people who end up owning clubs are those people who have passed. The Premier League and everyone in football knows that they will be appropriate stewards and good custodians of the football club; so it is a very positive thing. I would not see it as a bad thing at all.

Q179 Jim Sheridan: The point I am trying to make, perhaps rather badly, is that if you do not have that open transpare ncy in sharing that information, you are then left with the conspiracy theories - the speculation about whether people owning clubs have an interest in laundering money , for example. That is the kind of speculation and conspiracy that opens up when you seem to be hiding or not sharing information that should be there.

Niall Quinn: I don’t think there is any hiding there. I think what we are saying to you is as a group this Premier League-

Jim Sheridan: But you won’t even tell us who this organisation is, this law firm.

Niall Quinn: That could change. Maybe I sounded a bit too covert there. It is a law firm, a specialist law firm. It is up to the Premier League in a meeting to agree whether to make that public. I can’t make that public on their behalf. What I would say to you is the issue that you want is the issue we want, and we want to make sure that fans have a say about that. Do they need to be told about somebody who probably chanced their arm and came along and we saw coming early? I think it only creates a little bit of instability where people think that we even would speak to those kind of people. We have to do the thing right, Jim, to get the right kind of owner.

Q180 Jim Sheridan: It just doesn’t sit well with me.

Niall Quinn: I am happy to bring that back to the Premier League and say, "Should we make it clear because people have a doubt about this?"

Jim Sheridan: In terms of the fans , it is a need-to- know basis.

Niall Quinn: I am here to take that on board and I will bring it back and we will look at that on your behalf.

Peter Coates: But the UK does have open borders with business, and football is partially a business as well as a sport, and we have lots of foreign ownership of many of our companies around the UK. It is a fairly normal thing in that regard. They do not necessarily tell you who the people are who might have wanted to buy a company and who did not buy it for whatever reason. They only focus on the people who have taken it.

Q181 Chair: It has been suggested in the past that, given some of the people who have ended up owning football clubs, it is difficult to see what you have to do to fail the test. Are you saying to us there are people who have been told they are inappropriate to own a football club?

Niall Quinn: Yes.

Chair: Do we have any idea of how many?

Peter Coates: We don’t know the numbers but we do understand that there are people who wanted to buy and failed to buy because they did not pass the test. That is our information from the executive of the Premier League, but we have no numbers for you.

Chair: We will pursue it with the Premier League.

Q182 Mr Sanders: What role, if any, should supporters’ trust s play in the governance of your clubs?

Niall Quinn: When it comes to fans and their love for the club, I could just tell you about Sunderland and what we do with groups of supporters. We have a meeting every four weeks with our supporters’ liaison group. We have a meeting every six weeks with the branches. We have senior management attend those meetings. We take into account their fears and requests, and their desire for the club to do better-their side of the story. We bring it in and that reaches board level and we look at ways of comforting them that their club is being run properly. I think that is probably the issue. Just last night, for instance, I had a forum of 400 fans; I have another one tonight with 500 fans. Every so often we do this; we go out and we give them a state of union address. We hear their fears from the floor and not through the media, which is a much better way of getting to the problem. Look, there are problems out there. The Premier League is the most incredible thing. The world loves us, but in our own back garden everything isn’t so perfect and we are not here today saying it is. But what we have to be able to do is to listen to people and hear what they have to say, and feel that we can behave appropriately and give them the comfort that we run the clubs properly. In terms of fan representations and stuff like that, I am the fan. I am their person in there.

Q183 Mr Sanders: I think there is a certain difference in north - east football being just that much more passionate and maybe even that much more local compared to Manchester United, whose fan base is perhaps not just located in the Manchester area. How does Manchester United communicate with its fans, given that its manager will not even communicate with the world at the moment?

David Gill: We communicate with our fans on an extensive basis. We have invested in our fan relations team heavily over the last few years to improve that area. As I said earlier, we had 36,000 phone calls last month. We have thousands of letters and e-mails, which we respond to appropriately. In terms of formal processes, we have a fans’ forum that I sit on with four other senior executives where we meet a representative group of fans to discuss issues.

Q184 Mr Sanders: How often does that happen?

David Gill: We meet a minimum of three times a year, sometimes four. We have an extensive branch network, both in this country and overseas, and again there is regular dialogue between the branches and the team responsible for managing those relationships throughout. Then I went to a meeting just before our City game and answered questions in an open forum with other members of the team. So we communicate all the time. We understand it, but as Niall says, on our board we have Bobby Charlton. He is a big fan. We are all fans on the board. We understand it and we work with them, but I think we do communicate appropriately and sensibly with our fan groups.

Q185 Mr Sanders: But somewhere communication must have broken down for something like FC United to have been created. Have you tried to improve your communication with fans since the creation of FC United?

David Gill: There are two groups: FC United and MUST. As I said earlier, MUST’s objective is to change the ownership. So I think it would be rather strange, unless they change their objective, to open a dialogue with those fans. But there is nothing to stop a member of MUST or a member of IMUSA or a member of FC United sitting in the Fans’ Forum if they choose to apply. There are elections every year-half changes one year, half the next-to our fans forum. They can apply if they are a season ticket holder or a junior member and so on. They can apply to go on and appear through that. We are happy for them to be on those forums. Clearly, at the same time, we are not going to engage in structured dialogue with organisations like that. I do not think it is appropriate or sensible.

Q186 Mr Sanders: I am just bemused because Niall Quinn has perhaps given a model on how you would communicate with supporters-individual meetings involving lots of people on a regular basis. No disrespect to Sunderland but they have not won the league or the cup or been European champions, and here you are, a premier Premier League team, and yet you have all these supporters’ groups you will not even talk to because they are at war with you. What is going on?

David Gill: They are at war with us? They are at war with the owners. There is a group there, we understand that. But I am not going to sit here and say that we are going to suddenly open the dialogue. We understand the importance, like any business and any sport, of the fans and we do have those regular dialogues with them. We have many, many communications, as I have outlined. We take those on board when we are making decisions, whether on ticket pricing, concourse catering or the shape of the programme. Digital media is a great feature that we’re using, the internet. Particularly we have a number of sponsors overseas and we are developing products for them; for example, in Saudi Arabia for our fans there through Manchester United content. So we understand the importance of communication and we don’t take it lightly. We discuss at our management meetings, at board level, what we are doing with that. If we are going to be castigated for not speaking with one or two groups who have particular very clear agendas then so be it, we will take the castigation. We are very comfortable with our method of communication and we would be naive and stupid if we did not understand what the fans think and what they want, and reflect that in our business policies. We are comfortable that we do that.

Q187 Mr Sanders: But don’t you see a pattern here that when you disagree with somebody you stop talking to them?

David Gill: No. Okay, I will ask you a question. Their intention is to change the owners. Do you think it is sensible to sit down and change the owners? This body came out of Shareholders United Against Murdoch, which was formed in 1998 when Sky tried to take us over. They have evolved since that. They want to have a situation where they have other owners, or they can own the club or whatever. So unless they change their situation I do not see a reason to sit down and talk to them.

Q188 Ms Bagshawe: Let us just go back for one second to the last question on the issue of foreign ownership. Fully half the clubs in the Premier League are now foreign-owned and there is quite a lot of concern out there that that was going to affect the decision-making capabilities of the Premier League, particularly in ways that relate to support for the national team and for training young players up to be England players in the national team. Do you have any concerns at all that vast swathes of the Premier League being under foreign ownership may have a knock-on effect on our national team and our national game?

Peter Coates: I think that improvements have been made on that. There has been an argument, and it may be a good argument, that perhaps the balance had gone too far; there were perhaps too many foreign players. But the introduction of the new 25-man squad has changed things. Every club does want to produce indigenous players, obviously. There is nothing like your own players. We would love to have at Stoke-and I am sure Sunderland and Manchester are the same-boys who come up through the system and are local to the area. That is a very important thing. We pour millions of pounds into development. One of the arguments against the Premier League is that they perhaps don’t get enough opportunity, but with the difference in squad size, I think that is a positive thing and has improved the opportunity for young players to come through.

Q189 Ms Bagshawe: Of course you are a British owner that took the club back out of foreign ownership, and I suppose the concern that fans have is that foreign owners are looking at the club as a successful investment, something where they want to make a bit of money. They have no skin in the game whatsoever if the England team does well or does poorly, and that is a concern for some fans. Mr Gill, how do you address that?

David Gill: No, I disagree with that. As I said earlier, the whole strength of football works in a pyramid system and I think if the national team does well there is certainly a knock-on impact to the Premier League, and to the attractiveness of it. We have seen what is happening in Spain at the moment with their team doing very, very well and I think that trickles down. So I don’t agree with that. As Peter said, we are very interested in developing our own talent. We put millions in and there is a big review going on now in terms of youth development, which is a tripartite process, involving the FA, the Premier League and the Football League to see what has happened. The academies have been in existence now for 13 or 14 years. We are now looking to see what changes and improvements need to be made. We are putting a lot of money in and perhaps the players are not coming out, so how do we improve that? Around the Premier League table, there is great support for the national team in making sure England does well. There are issues to be worked on, for example the match calendar, but it has never entered any discussion I have either had with the owners or around the Premier League table that there is lack of support for the English team, because I personally think it does benefit the game.

Q190 Ms Bagshawe: What about you, Mr Quinn?

Niall Quinn: I suppose one of the proudest moments we had both as Sunderland fans, as the owner, as myself and the board and our manager, was when Jordan Henderson, who was at our academy since he was eight years of age, made his England international debut this year. I think to us that justified everything we have tried to do in the last few years about bringing our home players through. It is funny how things go. When I came back to the club five years ago even local kids in Sunderland didn’t want to come to Sunderland. We were losing them to Middlesbrough and Newcastle because our academy was not working. With the owner’s help we have been able to put more funds into that academy and, as I say, Jordan is the picture postcard this year. But the great thing is that on Saturday we were at the Emirates in a game that went all around the world-a fantastic game against Arsenal-and four of the players stripped out of our players and subs had come through our academy. We think that should augur well for English football in the future.

Q191 Dr Coffey: Debt has come up several times in this conversation and although my colleague Mr Collins is coming on the aspect of financial fair play-and it is interesting to hear your comments, Mr Coates-I wanted to ask Mr Gill, in terms of the financing choice for Manchester United, how much was driven by tax aspects, such as interest relief offset against tax and similar? How is it used potentially as a loss making vehicle to offset other tax? Is that the main driver for the reason why you financed that way?

David Gill: That is an owner issue really. It is true to say that interest expense for any UK corporate is a tax deductible item and they have used that. But I think if you step forward, we still pay significant amounts of tax. Our tax payments to the Exchequer last year totalled about £75 million; over the last five years it has been £370 million.

Q192 Dr Coffey: Is that corporation tax?

David Gill: No, it is various elements. There is VAT; PAYE is a big one, clearly; national insurance and corporation tax. So, yes, our corporation tax charge has clearly gone down as a result of that interest expense, but as to whether it makes sense to use that in terms of the overall planning of their finances, it is for them to answer.

Q193 Dr Coffey: I recognise that, but if you go across the other side of Manchester, Sheikh Mansour came in and made an equity investment. Do you think we should be changing the financing laws to encourage that rather than allow debt finance to leverage?

David Gill: I think if you are going to change it-and it goes back to Peter’s point, sport is a business but it is also a sport-you are going to have to change it for all UK corporates. I think companies should operate within UK corporate law, company tax and so on. If the Government do not want to operate that way, fine; but I do not think it will change for football’s purposes.

Q194 Dr Coffey: I do not want to steal Mr Collins’ question so I will try not to, but with the forthcoming regulation is there not a case for you already making changes to how you operate financially in order to cope with what is coming?

David Gill: No, we are very comfortable with financial fair play, if you are talking about that, and how it operates and we understand the impact. Our interest expense is an operational cost to the business and it will be, quite rightly, included under financial fair play. It should not be excluded. We are very comfortable with that and we will operate within it.

Peter Coates: I think there is nothing wrong with debt so long as it is sustainable debt and affordable debt. I think that that is the critical matter. Quite clearly, Manchester United can afford their debt. Debt is wrong when you cannot afford it and you are irresponsible. As for the tax aspect, there is an argument which I know is doing the rounds, and it is for UK legislators to decide whether interest should be allowed or not. But that is a matter for parliamentarians, not for football clubs.

Q195 Dr Coffey: Could you clarify, Mr Quinn: are you debt financed or are you equity owned?

Niall Quinn: Five years ago when we took over the club we inherited a quite sizeable debt. A group of Irish investors came in and invested themselves in the club, maintaining the level of debt. Ellis Short then came in and took all the shareholding and we have worked consistently over the last three or four years, since Ellis has come in, on the club’s progress. While we have made progress, we have also reduced that debt by about 25% and other money that he has put into the club he has capitalised. So he has been a model owner.

Q196 Damian Collins: Following on the questions about financial fair play, do you have any concerns about the structure of the UEFA fair play rules? Mr Gill, does that pose any problems for Manchester United? For the representatives of the other clubs, could you live within those rules if you qualified for European competition next year?

David Gill: We were involved through the European Club Association, as were other clubs, such as Chelsea, for example, who were on the working group to develop those proposals with UEFA and make sure that what was being put in place was workable, made sense and was for the benefit of football; whether it be the benefit in terms of making sure, on Peter’s point, that clubs could operate within their own resources, in terms of ensuring, potentially, a limiting effect on player cost, or in terms of transfers and wages, so there are benefits coming out of it. We are comfortable with it. The critical issue will be around implementation and the sanctions around that, and making sure that it is appropriately applied. But I do not think anyone can criticise the objective of ensuring that clubs operate within their own resources, personally.

Peter Coates: I think it would be a good thing for football. My only concern will be its implementation and I want it to apply to Italy and Spain just as rigorously. We will play by the rules, as we should and as we would want to, and we have to be confident that UEFA will see that other clubs in other countries do the same. Even in the Bundesleague, it is not quite clear where everybody fits. They have lots of problems, lots of debts, and they have the kind of issues that we have been discussing today.

Niall Quinn: I suppose, from our point of view, at the very start when this first came into being a couple of years ago, when it was first heard of, we wondered was it an attempt to bring the Premier League back to the other leagues. I think there was a little bit of that at the very start, but we have worked our way through it now. It has been quite extensive in terms of the research and where we are all trying to get. A lot of people have put a lot of effort into this and I would back up exactly what everybody is saying. We are very comfortable. We think it will be very good for the game. I think the important thing is that fans feel like that and they feel that it is a good thing coming in, too. But can I also point out that I put petrol in my car yesterday and a fan told me to get my bloody chequebook out and sign Danny Welbeck from Manchester United? So while we talk this game we are under severe pressure to keep doing what the fans want. Hopefully, if they learn that FIFA fair play is a good thing too, then we can all make progress.

Q197 Damian Collins: I suppose Welbeck might have cost about the same as the cost to fill up your car as well?

Niall Quinn: A little bit more.

Tony Scholes: Spiralling wage costs at one club affect the rest of us, so financial fair play is an important thing to bring in. In its first guise, though, it would have been damaging to us. A club like Stoke City would have fallen foul of financial fair play because there was no latitude at all. But with the latitude that has now been negotiated into it, which does allow a limited amount of losses each year or a limited amount of owner investment, then I think we as a club are happy with it and as a league we are happy with it. Peter’s point is the crucial one. This country, our Premier League, our FA, will apply it rigorously. Our concern and our request is that every other country throughout Europe does the same.

Q198 Damian Collins: Given the positive response to it from you all, why shouldn’t we ask the Premier League to adopt this as a form of standard practice so that any club competing in the Premier League would be eligible to compete in European competition if they qualified?

Niall Quinn: That is a journey we hope to go on and we would welcome being brought into that if everybody else was. I think some people would turn around and say, "But, Niall, you have had a couple of years of investment and you have had a leg up to get to a point now where you want to narrow the rules", and I have to accept that. But again, for the general good and the greater good of the game, I think it would be a better idea if all of us came under that. Yes, I would agree with that.

Tony Scholes: Many clubs in the Premier League at the moment adopt the UEFA licensing process. We do as a club. We have done since we have gone into the Premier League. You could argue quite reasonably that our chances of qualifying for Europe in the first couple of years were very slim, but as a club we thought it was the right thing to do. We are in the company of the vast majority of clubs in the League to do that.

David Gill: I think, if you look at it over time, as we understand how it operates, I think you can see that happening. We referred to an earlier example. The Premier League voluntarily agreed last year to introduce squad sizes, put the 25 in with the home-grown limit within it. As Tony said, a lot of clubs who apply for licences-they are operating anyway-would operate, if they got into Europe, within that. I think you move over time and I can see that happening.

Q199 Damian Collins: You could see that?

David Gill: Yes, over time I think that would be the case; as people understand it, how they operate. As Niall said, people get into shape for it and prepare for it. I think you will see that happening.

Damian Collins: Mr Chairman, I want to move on to my next question on the football creditor rule, but I think Mr Farrelly is going to come in.

Q200 Paul Farrelly: Clearly, I think that experience across sport shows something about the issue of salary caps: they only work when you have a community of interest-for instance, as in rugby-and there is arguably not a community of interest between the Manchester Uniteds and the Chelseas and the Arsenals and everybody else who just wants to stay up in the league. I am sure, David, that many clubs operate an individual cap, even if it is not formalised, because everybody will want something else, if somebody gets another 10 grand a week, and then there will be no doubt in the interests of running a club an overall wage bill. But then you come along and you pay an outrageous amount to Wayne Rooney and you must have them all tearing their hair out, and any parent or teacher because you are also rewarding bad behaviour. How can you justify that if you have any feeling for your wider responsibilities to the game?

David Gill: We do have feelings for the wider responsibilities of the game. You said it is outrageous; that is your view. I do not think it is particularly outrageous and we have acted very sensibly in Manchester United. I agree with you 100% that a wage cap will not work. You use an example; yes, that is English Premier rugby but a lot of the players go to France where there is not a cap. These sort of things happen. Personally, I think a salary cap will not work but I think financial fair play will help within that. In Manchester United we have our own self-imposed cap. Ever since I have been there, we have imposed a cap whereby 50% of our turnover can be used on total salaries. A lot of that is players, clearly, and staff, but we have done that.

Within that, we believe that we can both retain the best players and attract the top players, and compete against other teams both domestically and European-wide, but at the same time retain money to invest back into the club, whether it be the training ground I mentioned earlier or revamping our boxes and so on. So we think that is the best way to do it and we are very comfortable with that. I think we look at it in the round. We are very careful in terms of what we pay our players; we make sure we do it and understand it. As I said in response to the first question, the business policy and business objectives of Manchester United depend on what happens on the pitch. We have to be out there playing attractive football, competing and making sure that we can do that, and we will do that by paying players appropriately.

Q201 Paul Farrelly: Just a brief supplementary, Chairman. Tony from Stoke commented on the knock-on effects of rising settlements. With Wayne Rooney, one could take the view that from a business perspective you have simply protected the value of an asset in what you have done; so fair play to you. But at the same time you have given a message, haven’t you, that bad behaviour pays off? Players making statements against the club will have agents encouraging them to carry on, because they will just say, "Look what we did in the Wayne Rooney case."

David Gill: Wayne Rooney is a great player both for this country and for Manchester United. They are role models, players, and there are examples of behaviour that is inappropriate; I would not disagree with that. But at the same time he is there, we want to keep him and I think it has not had a knock-on effect. We have done certain deals with other players, which we have announced recently, and the impact of what we paid Wayne-not that they know that-never came up. It was about what they believed they should be getting for playing for the club and we have acted accordingly. I do not think we should hone in on Wayne Rooney in this particular situation. He is a great player for the club and country and will continue to be so.

Q202 Damian Collins: There has been some discussion in our previous hearings about the football creditor rule, and I think concern has been expressed in the written evidence we have received as a Committee that this is an outdated practice and that it is unfair for football clubs to give each other preferential treatment while other creditors, be they the taxpayer, the taxman or even St. John Ambulance, potentially lose out. I would just like to ask your comments as people running clubs as to whether you think it would be good for football if we moved on from the football creditor rule. Mr Gill first, please.

David Gill: I can understand why it was in there in the first place. We have not formally adopted a board policy on it, but I think the general view of Manchester United is that it is a rule that has had its time. I think we have had to address it in certain instances in the Premier League whereby we now put in quarterly reporting-I believe the Football League does as well-to certificate that we are not in arrears in respect of HMRC debts in any way, shape or form, which I think is a positive thing.

But I agree with you: I think the whole issue of fairness in administration or liquidation or whatever is that everyone should be treated the same. One argument for it has been that it ensures that a club that has overtraded does not then get back into the League, albeit with a points deduction, or perhaps into a lower league, having gambled without its having come off, to the detriment of another club in that league. I can understand that argument. The positive benefit would be that clubs would not get into that situation. Their due diligence in terms of their dealings with another club, whether it be on transfers or whatever, would be perhaps more rigorous and, therefore, they should not find themselves in that situation. If it does occur, it is rare. On balance, we would favour its being withdrawn.

Q203 Damian Collins: When you talk about the dealings between clubs being more rigorous, are you saying that if a club was selling a player to another club they would be much more cautious about reaching that agreement until they were convinced the club had the money to pay them?

David Gill: I think so. I think you have seen in the last few years that there has been a trend for transfer fees to be paid over a long period. Previously, the rule was you had to pay within the year, which again I think is a better discipline. I think it could lead to that rule being scrapped, personally.

Q204 Damian Collins: Just to pick up on one thing; in terms of the transfer payments, are you saying that you think because transfer payments are spread in instalments that has an inflationary pressure on transfers and encourages clubs to make commitments they may never have to fulfil?

David Gill: Well, I am not sure they will never have to fulfil because I do not think anyone would enter a legal agreement knowing they do not have to fulfil it. But there may be an opportunity to use other clubs as a funding mechanism as opposed to if you have to go to a bank or a third party institution to make that purchase; then perhaps they would look at it from a different perspective. That is what I am saying. I do not know; it could do, it may not do. But I think that is-

Peter Coates: I am ambivalent about it. I am not sure which way I want to go on this. I understand fully David’s arguments. We have improved and tightened the rules, both for the Premier League and the Football League, whereby clubs have to report if they have not paid the Inland Revenue. So we have made an improvement there. I am very surprised the Inland Revenue allow it to happen. That has always surprised me. It is a difficult argument. It may help clubs lower down the leagues maintaining it and retaining it, so there is an argument both ways.

Q205 Damian Collins: But as Chairman of Stoke City-heaven forbid that Stoke should ever be in a situation like this-how would you justify it to the community that you might have to pay a football debt to a club, say like Ipswich, before paying a local supplier in Stoke?

Peter Coates: I would find it very difficult but I have been in business all my life; I have never not paid Inland Revenue. You pay your bills, it is normal. I just do not do things like that and never have. I would not dream of not paying bills that I know are due and have to be paid. It is not in my mindset to do it. I would not store up debt in that way, it is wrong. The clubs should not do it and businesses should not do it.

Tony Scholes: I think that the main issue with the football creditor rule has been with HMRC over the last few years. The Premier League has taken action in that regard, as David and Peter have already said, in making sure that clubs cannot get into arrears with HMRC. I think it is also fair to say that we have debated this around the table many times and I do not think anyone feels comfortable with the fact that another football club may get paid but a small local supplier in that community does not get paid. No one feels comfortable with that.

There is another side that needs to be weighed in when considering the football creditor rule and that is that it does help to maintain sporting integrity. When a team is playing another team, team A may have sold a player to team B and not been paid for that player and as a result of that may have been unable to go and strengthen their own team. If they then play in a game there is an imbalance in the sporting competition. The source of the football creditor rule is to do with sporting integrity, but I think it is fair to say that where we are now there is probably an appetite for having a fresh look at it.

Q206 Damian Collins: I just have a question on that. I am not sure where the integrity is there, because if a club is competing at a level beyond that which it can reasonably financially sustain simply because other clubs are prepared to sell players to them knowing that their risk is protected, how is that good for the integrity of the game?

Tony Scholes: It is the club who have sold the player and not been paid and would reasonably have assumed they would have got the money to go out and strengthen their team as well as a result of paying that player. This is the original argument for the football creditor rule. If they cannot rely on those payments coming to them, then that club has been weakened as a result of it.

Q207 Damian Collins: But wouldn’t it be better to have a system where the transfer was not made in the first place if it was clear the club couldn’t make the payment?

Tony Scholes: That is David’s point. If the football creditor rule was changed it would put the onus on clubs to do more due diligence over the creditworthiness of the clubs buying players.

Niall Quinn: Yes, and I suppose there are 17 other chairmen around the country who I am conscious will want to have a view on this before we put this rule in the dustbin. From our point of view, the fan in the street meets the guy who printed the programmes who did not get paid and he sees the player driving out in the big car who was paid. I think that is damaging and we have to look at stuff like that and say, "Yes, tidy this up and give that guy who printed the programmes as much skin in the game as the big players."

Q208 Damian Collins: Can I ask just one final question, Mr Chairman? You heard what David Gill said about transfer payments. Sunderland and Stoke, would you concur that there should be tighter guidelines on the period of time over which transfer payments can be made?

Niall Quinn: Not all payments are Premiership club to Premiership club; so there is an outside force there when you are buying foreign players and that becomes a minefield, too. But certainly with club to club in the Premiership I think we are all of the opinion that there is enough money in the Premiership kitty to hold back to protect anybody and then punish somebody who did it the wrong way. I think we could handle that in-house ourselves.

Q209 Jim Sheridan: Could I perhaps ask about the role of players’ agents in the game today? The evidence that we have taken so far seems to suggest that there is a general consensus that players’ agents are a necessary evil, that there is no alternative. Is that an accurate assessment?

Niall Quinn: I would think from our experience, yes. It sounds about right. I never had an agent. I came back into the game and I had this great idea that at Sunderland we would not allow agents at the training ground, we would never engage with them, and then all of a sudden you realise to make progress these guys were getting their players to go somewhere else and were laughing at us because they had power. The big power came with the Bosman ruling and the way European law supports them; then you throw in the transfer system that allows a window of time. It was manna from heaven for the agents who squeezed us and who continued to squeeze us in all those periods. The game is heavily stacked in their favour. One of the big problems that that causes is that while, okay, they are getting too much money because they are squeezing us all and we all want to stay in this brilliant league, the man in the street, the football fan, feels ever more distanced from it when you talk about the wages.

Let me say what I would like if there was anything that could be changed in our set-up. We have our media, we have the Premier League, we have our football club, we have our fans here and we have our players here. If there is anything I could change it would be that any improvement we could make would go directly here and satisfy that and repair the gap. I think we should all look for something that says, "How can we help this group of people out to still stay in love with the game?" If we send the matches abroad with empty stadiums, it is over; the Premier League is over and these are the lifeblood of the game. So how do we protect these? Every revenue that comes in, the agents have the upper hand to squeeze it out of us. That is the case; I think you would agree with that. How can we stop that? How can we find a better way of these people to love the game?

Now, these are the same people who tell us, "Get your chequebook out, I want us to be top six." They are also saying now, "You are paying too much money; this is wrong", and at the same time saying, "Can we go to the matches a bit cheaper?" The big thing we are getting from the forums is about ticket prices; for the guy who wants to go and bring his two or three children, it is impossible. In the old days it was possible; it is not possible now. Obviously, incomes have changed and the economic situation is as it is. But what I would love from any group, whether it is this group or any group of significance that really cares about the game, is consideration of how we can bring them into the stadium cheaper without the agents cranking it all up again and causing a big problem for the club.

I think we would all agree here; if we stayed with the same net amount of money each year on the basis that we were giving them a discount on tickets and we did not lose it somewhere else, we would all go for that, welcome it with open arms and fill the stadium out. I think we can talk about a lot of the fan issues, and the federations and the sports trusts will bring up hundreds of things, but the big thing is they want to come into the grounds cheaper and I think we should look at ways of accommodating that. The players are big winners here in this; the players and the agents are big winners. Inland Revenue is a big winner in this. The Inland Revenue takes a big take of all this, too. Is there some way that we can get those two-and I am not saying they are together in this; I think that that is coming-not to all go in their way as it does now? Could we give something back here without affecting our business going forward? It would be suicidal for us to let them in half price now. The agents will still press the crank on, the Revenue still take their take, but could there be a way, if we tilted it back this way, that would benefit them? I think that is something we should all aim for.

Peter Coates: I think agents are a fact of life and I think I should be free to do what I want in terms of what I pay them. It is up to us to negotiate sensible business with them. One of the things you could do that might improve it is transparency; in other words we have to say what we have done in terms of agents. You can’t divulge a player’s contract-obviously that would be completely wrong-but you could have transparency in agents’ payments. We all want to drive agents’ payments down. On the other hand, it is a marketplace and we should be free to deal in that market. It is up to us to be smart enough to make sure we do not pay too much, and that when we pay a higher fee, we are seeing whether there is possibly some reason for it.

Tony Scholes: It is fair to say, though, that some agents perform a very valuable role. They are part of the industry now and they do perform a valuable role. But agents are paid a disproportionately high amount of money for any deal that they are involved in. That is a fact and I think we would all accept that.

Q210 Jim Sheridan: They can also be used as scapegoats as well. When a club wants to transfer someone they can then blame the agent. But putting that aside, everyone we have spoken to in football during this inquiry, when we talk about agents, more or less says the same thing as yourselves, which suggests to me that there could be a role for FIFA if they act collectively. It seems to me that FIFA have abdicated any responsibility whatsoever to try and regulate this part of the game. At the end of the day, whether it be in England or anywhere else in Europe or the world, agents take money out of the game. It is not going back in again; it has gone out of the game and it is never seen again. Why is FIFA or UEFA not taking a firmer role?

David Gill: It is interesting to talk about taking it out of the game. I am always interested by that statement because accountants take money out of the game, and it does not go back in. Lawyers take money out of the game, and it does not go back in.

Q211 Jim Sheridan: They are a necessary evil.

David Gill: But agents are. I think agents do have a specific role. It is like any walk of life; the actual term "agent" has a bad connotation, but there are good agents and bad agents. But the players do need them for services and I think we should understand that. When we look at what we are going to pay a player, whether it be renewal of a contract or a player transfer, we look at the overall investment. Like any sensible business, we look at the player wages, the agent’s fee, and we determine whether that is appropriate for our business, and we do that on the transfer fee. I am not saying there is no issue, but I agree with you in terms of FIFA. FIFA have been looking at the matter. I think that there are a number of cases with respect to agents in which they are looking to see whether the term should be changed to intermediaries. That certainly has many more syllables, but we will still call them agents, and they will still be there. They are looking to do something whereby they put the onus on the clubs and the players to have responsibility.

I think Peter makes a very good point in terms of transparency and understanding. As long as in any particular transaction if a player is aware what his agent has received from the club or from himself and everyone is aware of it, I do not see a particular issue in it. It is another way of using the club’s resources and making sure we are responsible for how we discharge those club resources. I think it is a very interesting issue; it has been there for many years, and we cannot change it domestically. The Premier League tried a few years ago to make the players responsible for paying their agents. It failed miserably. We had to change the rules back again.

Q212 Jim Sheridan: That was my last question. How did that fail, though? Effectively the fans are paying twice now, are they not? They are paying their player and they are also paying the agent.

David Gill: I do not think you can separate them out. I do not think the agents’ fees are necessarily incremental. It is part of the overall investment. So I do not think it is true to say, "That is it, you can just pay the player X and forget about the agent.". One of the reasons it failed was the tax implications. Under UK tax rules, if the payment that the club paid on behalf of a player was not a tax-deductible expense, he had to gross it up. That was a key point, and we became uncompetitive versus what was happening in Spain, in Italy and in Germany. Again, we operate in a worldwide market for talent. As part of this earlier discussion, it is not just about players developed in England; it is a worldwide market. So we have to operate against that if we want to attract those players in with what the regime is in other countries. Your point is exactly right; FIFA has to take the lead as a world governing body to make sure it is managed and appropriately controlled.

Q213 Jim Sheridan: Just finally-still with you, Niall-do you think it makes you a better player if you are paid £1 million or £10 million?

Niall Quinn: No, I do not. I can’t stand here and defend where wages have gone. It is the greatest show on earth, the Premier League, and we want it so badly and the agents have manoeuvred themselves to manipulate that whole situation brilliantly. To be a little bit fair to them and to ourselves as to why we tolerate it at times, we would at times as a football club be carrying wages on a player who is of no use to us; he is sitting on a long contract, it is really tough and we get a phone call from an agent who says, "I can get him to wherever", some part of the world. For us the big thing is that, "Okay, we might be exposed to £1.5 million wages for the next year, what do we do? We can get him out there. The agent wants £250,000 for one day’s work, you know something, we are £1.5 million better off, let us do it". That is the pressure we are under sometimes as football clubs and they manipulate it and market themselves brilliantly. It is a necessary evil, going back to the very start.

Q214 Paul Farrelly: I wanted to come on to the Football Association, but first can I just ask a couple of questions about your own house, the Premier League? Is there merit in the Premier League shaking up its structure and having more independent directors? Is the board too small? Should the Premier League’s governance structure be more representative of the different shades of opinion and the different ambitions of different segments of the league?

Peter Coates: I suppose you have to say, and it is only our third year, the Premier League is very well managed. It has, I think, probably a quite outstanding Chief Executive who has done a great job for the Premier League. As a model it has worked very well and it has been a big, big success. You do have shareholders; you have 20 shareholders all with a vote who you meet four times a year and, therefore, you are able to have your input. I can understand you thinking it is perhaps Richard Scudamore and Dave Richards, but it does not quite work like that because all the shareholders have a vote, you meet four times a year and you are able to have your views represented.

David Gill: I agree. I think if you look at it, the actual Premier League is a success story without any question. You are just adding people because of a need to add them. I think the remit of the Premier League is relatively narrow. It runs the actual game, the competition. It is responsible, quite rightly, for the selling of the television rights and other commercial aspects of it, whether it be the ball sponsorship, the title sponsorship and so on. I think it is well run and I think the way that it works, the voting structure with 14 votes required to pass a resolution, means the objective and discussions and debates and issues are taking place in the forum of the shareholder meeting. In adding an independent or another non-executive person, I think you are just doing it just to say you have ticked the governance box as opposed to adding value to what is a very well-run league, very well respected around the world.

Niall Quinn: Yes, I feel the same. This is our fourth year. What I found interesting was that every Saturday you have 20 clubs who want to beat each other up and then we go to a room to find ways of making it all as one. It was unusual and I sat back and I watched and listened for quite a long time before I got involved and felt that the good work it is doing is not publicised as well as it might be. It is an extraordinary success story, the Premier League, in theory. I am not saying it is perfect in our back garden, but we do have the forum there to alter things as they occur.

Q215 Paul Farrelly: Can I move on to the FA? We had a very strong picture of the FA painted to us by Lords Triesman and Burns in the opening session. I am sure you have read the reports. The FA is pictured as operating with the chairman and the chief executive; with representatives of the professional game meeting the day before, agreeing, in good old Marxist/Leninist/Trotskyist fashion, the line. When they say no they mean no. The representatives of the amateur game do not always agree with them but they never vote against them and if the chairman and chief executive have some interesting ideas, they are left up a creek without a paddle if the professional game simply says no. We have seen the Triesman report, which was going to be a submission to questions by a former Secretary of State as why the FA did not put their own submission in. Was that position adopted by the FA and the professional league and the premier representative reflective of all shades of opinion across different clubs in the Premier League or are there clubs in the Premier League that would be more progressive in accepting reform?

Peter Coates: I think that it has a recent very bad record, the FA, with lots of own goals and lots of things that have gone wrong, which were frankly very bad and reflect very bad on the game, and I think it does need reforming. The Burns Report is not a bad marker for that. I am strongly in favour of two non-executive directors. I think we have made an appointment of a good chairman. Like any good organisation, I think you need a good chairman and a good chief executive, and he will get the people around him.

But he does have to be able to do his job and you referred to some of the more dysfunctional problems that he faces. I think two nonexecutive directors-and he should have some influence as to who they are, they should not be foisted on him-would be very good for the governance of the game. I think along with that you would need to reduce the size of the board. It would become too big. I think the chairman needs help and I think two nonexecutive directors of the right calibre would be an enormous benefit to him; so that is something I would like to see. We have not had support for that in the FA. I am hoping perhaps that is going to change and there will be a move in the direction of that and some of the other things that I have just referred to.

Q216 Paul Farrelly: Niall, was the "just say no" brigade reflective of the position and opinion of Sunderland?

Niall Quinn: I do not think so. First and foremost, we are in a tough place in Sunderland and it is a hard job. Concentrating on your own world 16 hours a day sometimes does not give you the space in your mind to map out a perfect road plan for your thoughts on the FA and where it goes. What you try and do is to see the big picture and hope that you can contribute and that we would not block things; just blocking for the sake of blocking something. David sits on the board. I think David would be in a better position to speak clearly on this, but we would take the view, each of our shareholders of the club, we take the Premier League’s view on everything that comes up about the FA. I thought it was really good in my time that the FA had representation at our meetings, that there seemed to be something happening between it. Now, obviously that came to a shuddering halt and it needs to get going again. Instead of looking back, I would be all for finding a way that is transparent, that we all feel we are doing our best for the game, because without the kids playing football in their respective amateur clubs, without this great love for the game, the Premier League will be at a loss, too. There has to be a collective buy-in there.

David Gill: As Niall says, I am on the board. In terms of where it is going I would support it wholeheartedly and I want to reiterate what Peter said because I think he articulated why independent executive directors would be helpful. That needs to be done in conjunction with trimming the board. I think that the FA has a very broad remit from grass roots through to coaching, through to the England team, through to the FA Cup through to the professional game and so on, and then goes on to discipline. Another area I would look at seriously, which Burns sort of advocated, was separating out the disciplinary side and making that semi-autonomous under the rules and regulations stipulated by the FA, but then with the actual body dispensing that discipline being separate. I think that would assist the FA because a lot of bad press comes out through the FA not acting on a particular issue because of this, that and the other. I think that would help.

Before I went on the board I thought on the national game and the professional game we would be at loggerheads. I do not see that. I think the debate and discussions at the board have basically been about moving in the same direction for football. If it is particularly just a national game issue, then we would support what they are recommending; they are experts in that area. That also works the other way around. It makes eminent sense to me. Without doubt the FA is not completely broken, but there are issues and the turnover of staff at the top, whether it be at the chairman, chief executive or general secretary level, cannot help. It cannot help any organisation for that to happen, and I think we have to bed it down, have some stability. In order to do that we also need to give the new chairman some support and some assistance at that level, and that makes eminent sense to me.

Q217 Paul Farrelly: Which representatives, which sectional interests, should be trimmed or cut back?

David Gill: At the moment that would take it up to 14-five national game, five professional game, the general secretary, chairman and two non-execs-so I think you can do it pro rata. I do not think anyone is that desperate necessarily to be on it. I think what we want to do is have a proper body there because that will determine the strategy of the organisation, monitor the implementation of that strategy, the day-to-day running of the FA, so whatever is best for the FA. I do not think people should just hang on because they have been there for ever. It is what is best for the organisation.

Q218 Paul Farrelly: The German FA has adopted a different approach. It has what you might call sectional interests on the board, which has evolved. It has representatives of women’s football, which is very big here as well as in Germany, and the director of football for the national team, because they feel the national side should have an input. Is that a route that we should be considering as well?

Tony Scholes: I think you probably need to be a bit careful. David is talking about reducing the size of the FA board, and if they are going to be effective they need to be small enough to be able to make good and clear decisions. If you start adding on sectional interests it makes it more difficult. But there is a structure below the board, of course, where such interests could and should be represented.

Peter Coates: We have two boards below the board; we have a national game board and a professional game board. There is no reason why the structure cannot accommodate the right balance and I think it is very important that the chairman and the chief executive are allowed to get on and run the business and are not stopped by the board from carrying out their role. Going back to earlier, I think two non-execs would be a very big improvement.

Q219 Paul Farrelly: You have been quite outspoken in our local press and for anyone who wants to listen, really, about the failings of the FA on a much broader front, from the turnover of chief executives, which has been mentioned, the way Wembley was handled and, indeed, the World Cup bid. What do you think the FA needs to do to improve its international standing overseas and its reputation here? Are there any organisational weaknesses that contributed to our dismal failure to get more than two votes in the World Cup bid?

Peter Coates: Well, it was pretty shocking, really, wasn’t it, whichever way you look at it? Now, who is responsible for that? Well, I am surprised that we did not know more. We have guys out there, we have a representative on FIFA and we had no idea all we were going to get was one vote. There is something wrong if we cannot do better than that. We should have known, for example, and maybe this is a criticism of FIFA and the chairman-if he has an agenda that he wants to spread football around the world that is a perfectly reasonable agenda in my view. If he wants to go to Russia, there is nothing wrong with going to Russia if he wants to spread the gospel, or the Middle East for that matter so long as we can play it in the summer. But things like that ought to be known and we say, "We are out of it, we have no chance". It surprises me that we are not smart enough to get a feel and get a flavour for what is going on and end up with egg on our face with one vote. So, yes, I was very upset about it. I wanted the World Cup in England obviously and I thought we had a chance from all that people were saying, but we seemed to have no chance.

Q220 Paul Farrelly: Niall, you have seen a few ructions in your time between the blazers and the players in Ireland. What is your perspective?

Niall Quinn: Well, I was heavily involved and I led the campaign in Sunderland. We got a great camaraderie going not just in Sunderland but the region. We called it a regional bid. We were thrilled to be called out first as the first city that was going to be hosting a game if it did come our way. We got very excited. But looking back now that it is all done and dusted and where it went, what I would say is if we were back again there was a lot of good stuff, but a lot of that good stuff got drowned in arrogance. I really believe that. We did not hear anything from Russia in those 18 months. People heard from us all the time. I am not saying that that would have annoyed or upset the people, but it did really take away from a lot of the real gilt-edged stuff that we had done. The next person who would dare venture to take on something like this in the future, I would plead with them to keep your good stories and keep your successes wrapped up and roll them all out in the last couple of days.

Q221 Paul Farrelly: David, in Germany we heard from a very senior, respected and reliable source that Sir Bobby Charlton was told a year prior to the failure that England had no chance because the numbers, were not there. Are you aware of that? Has that passed through? Does the game share this conviction?

David Gill: I am not aware of that situation.

Q222 Mr Watson: My interest in the governance of football is about how you protect players. As chairman, can you tell me if you know of any current or past players who may have had their privacy invaded through phone hacking?

David Gill: I am not aware of anyone at Manchester United, no.

Q223 Mr Watson: Niall, you played against Sol Campbell a few times. Were you aware when you played against him that his phone was being hacked?

Niall Quinn: No, I did not. Thankfully, nobody has any suspicions around the club. We do not feel threatened at all.

Q224 Mr Watson: You do not know whether Alex Ferguson’s phone was hacked?

David Gill: He has not mentioned to me, no.

Chair: Right, I think that is it. Can I thank the four of you very much?

Examination of Witnesses

Witnesses: Lord Mawhinney, Former Chairman of the Football League, and Henry McLeish, author of recent review of Scottish Football, gave evidence.

Q225 Chair: First of all, I thank Lord Mawhinney and Henry McLeish for having sat patiently through the first part of this morning’s proceedings. I welcome Lord Mawhinney, a former Chairman of the Football League, and Henry McLeish, obviously a former First Minister but also the author of a recent review of Scottish Football. Could I start by asking Lord Mawhinney whether he thinks the introduction of the Premier League weakened or strengthened what is known as the football pyramid?

Lord Mawhinney: It strengthened it, but I will come on to the present in a moment. It is a phenomenal success. I have sat in Beijing and watched Premier League games. I have sat in Boston and watched Premier League games. The future income of the Premier League is more and more shifting towards overseas media rights and whenever they launch their own television channel that will have another additional effect. It is a great success.

I think the difficulty is that it has created a problem about the handling and distribution of money. It has generated so much money that it has skewed, or is in danger of skewing, the system. The Premier League is one of the country’s great advocates for a free market and I pay tribute to it. The problem is that the Premier League is not a free market; it operates in a closed market. What happens at the Premier League affects the finances of not just other Premier League clubs but clubs right down through the Football League, and what happens in the Football League affects what happens in the Conference.

Going back to the earlier questioning, every time Mr Rooney or Mr Torres gets a salary settlement, that cranks up the whole system. Agents note it and they add a little bit to the value of their player. Other clubs note it. Whether that is good for the medium-term football pyramid I think is very debatable.

Q226 David Cairns: Henry McLeish, you have written this football review. It is a big review; it has 89 pages and makes lots of recommendations. Can you just encapsulate what you think are the key one or two recommendations that you would really like to see implemented from this review?

Henry McLeish: The position in Scotland is in some respects very, very different, especially in terms of scale and the financing of the Premier League in Scotland, and in terms the fact that we have 5 million people rather than 60 million. In that sense, I would, first of all, say that the context is very different. That said, as someone who has a passion for the game and who has played the game, I found that the football authorities in Scotland were really not fit for purpose-and I will be as sweeping as that at the start-because in a sense in both England and Scotland we are looking at two of the oldest associations. We are talking about history and about legacy, about a preciousness and exceptionalism that I think you only find in football, and about an insularity that is safeguarded in some respects from the outside world. In that sense, they were not fit for purpose-this is the SFA.

Then you take the Scottish Premier League and the Scottish Football League, as the two other institutions. I could find no good reason, for example, why they had been separated, because our SPL operates at a very modest level compared with England. That said, we had a fragmented game, there was lack of trust; there was a whole series of problems that had clearly accumulated over decades without anyone from the outside suggesting that things should be changed and without any momentum from the inside suggesting things should be changed.

After the review, and after speaking to an enormous number of people, the first thing I wanted to do was to improve significantly the governance of the game as exhibited by the Scottish Football Association. This involved a major overhaul of its committee structure, which was fine for the start of the last century, but not fine for the start of this century. They had too many people on the boards and a whole breakdown and fragmentation of their approach. Of course, there was also a severe lack of confidence in their ability to oversee the game and regulate the game. I suspect that, in terms of the FA in England, part of this is going on.

What I recommended was, first, sweeping changes to the structure, composition and modus operandi of the Scottish Football Association; secondly, the reintegration of the Scottish Premier League and the Scottish Football League, in no way stepping on the toes of either but bringing them together to collectively take the game forward; and then, thirdly, an acknowledgement-I think this is one of the issues that I think is interesting in England-that the game is bigger than the Premier League. Now, we can say that in Scotland because I think it is a more modest Premier League. That said, it was to talk about the fact that, in terms of the gap between national aspiration and national achievement, the gap was enormous. We were asked: should we reduce our national aspiration? Now, in Scotland that would have been heresy because we are a passionate country, although not always successful. We wanted to keep the aspiration alive, so what we had to do was to raise the expectation.

What I think has now come forward is a growing embrace of change and a growing of confidence that the game needs to move forward together, which means that football as a sport has to be resurrected as a game. Therefore, the whole emphasis should not be on the Premier League in Scotland and what it wishes to do. That can be accommodated and, of course, within our Premier League structure we have two clubs-maybe they do not need to be mentioned today-which are certainly the subject of much debate in Scotland in terms of dominating the Premier League. All in all, there was a recognition that the game is enormous and that the SPL has a part to play. As in England, however, you may have the best Premier League in the world, as we have heard this morning, but your national side does not reflect that in any particular way. Our effort in Scotland was to look at this in a more integrated way from the very grassroots talent elite development right through to make sure that we have the best Premier League that we can muster at the present time.

Q227 David Cairns: Talking of Celtic and Rangers, then, isn’t the problem that we are trying to organise a league in Scotland that has two great behemoths, two massive world cups, a few teams in the middle that are perfectly respectable, well-run clubs that have intermittently done quite well in Europe, and then this very long tail of amateur clubs or part-time clubs that we do not see in England, but we are still trying to keep the whole panoply of a structure as though we were in the same scale as England? This is not one of your recommendations, but wouldn’t it just be better for everyone-and it is not going to happen-if the Old Firm were playing in the English Premier League? You would have a much more rational structure than Scotland and the Old Firm wouldn’t be as constrained as they feel they are by the pitiful amounts of TV revenue that they are getting compared to what is happening in England.

Henry McLeish: I suppose the simple answer is no, and that is why it was not a recommendation. The realities are that Rangers and Celtic will continue to play in the Scottish Premier League. I think you are right to suggest that we have great difficulty now supporting the four divisions involving 42 clubs. That said, part of the recommendation was to acknowledge that, in terms of the community interest and community development, some of our clubs would be looking more at that than they would be in terms of a normal business model for development.

Secondly, within the structure of the SPL with the 12 clubs, which may go to 10, Rangers and Celtic are accommodated, although they are huge. 65% of all the attendances over the last 10 years in Scotland have come from Rangers and Celtic. We are aware of that, but on the other hand, even if you wanted to think that Rangers and Celtic could be involved down south, I think you are up against UEFA rules because it would allow you, for example, as a separate association to have the people from the German Bundesleague or others seeking to join your Premier League as well.

I think it is impractical. The politics and the possibilities are certainly to see Rangers and Celtic as a major asset in Scottish football but to ensure that some of the excesses we have seen recently are curbed. But that said, we have a very particular set of problems that in some respects, Chairman, do not really reflect what is happening down south.

Q228 David Cairns: Your key recommendation, then, is to merge the SPL and the Scottish Football League and to tackle the labyrinthine committee structure of the SFA and the blazer brigade there. How have these recommendations been received and how confident are you that they will be taken forward?

Henry McLeish: They are being taken forward and the board of the SFA has accepted most of the recommendations and, in fact, they have been approved by the board. One of the problems is trying to make sure that change does take place in other areas of the game. For example, we are keen to make sure that we work with other sports; with a bit of modesty acknowledge that while it may be the top game in Scotland we have a lot to learn from others. I was interested by the submission the FA made to you that because of their uniqueness it was very difficult for them to learn from others. That is flatly not the position because one of the problems your FA has compared with the Scottish FA is that you have very, very similar problems, which are a product of legacy, a product of history and a product of being inward looking.

Change and specific recommendations, I think, are going forward. But what we are up against in Scotland is a huge financial problem; not some of the issues that were raised earlier in the evidence session, but in terms of broadcasting, fan base and sponsorship. These are the three key issues in which we are trying to keep involved to generate more cash.

Q229 Dr Coffey: Just to each of you, how important are the solidarity payments coming from the top division down to the lower divisions, Premier League to Football League in a particular case, and, in particular in England, how important are the parachute payments and do they end up distorting competition in the Championship?

Lord Mawhinney: The help that the Premier League gives in a variety of ways to the Football League is significant and, up until recently at least, has been much appreciated. The parachute payments were instigated because the salary levels in Premier League clubs were so much greater than in Championship clubs that, without some transitional funding, Premier League clubs that got relegated would simply just head straight into administration or just tumble down the Football League and that did not seem to be fair. There was an agreement, which we supported, that a certain amount of money should be made available by the Premier League to Premier League clubs that were going to be relegated.

Chairman, can I just, if you will forgive me, make it clear that Mr Clarke and Mr Williamson spoke on behalf of the Football League? I am expressing my own view, albeit as Honorary President of the league. In my view, the present level of parachute payments are going to undermine the integrity of competition in the Football League. They are going to do that because the amount of money-£16 million, £16 million, £8 million and £8 million over four years-bears very little relationship to the salary issue that was the original case. I tried to persuade the Premier League at one point to link the parachute payments to the specific salaries of players that came down and as that player got sold or moved on, so that bit of the money could drop out. That seemed to me to be coherent with the original philosophy. That was totally rejected. We now have a set of circumstances where the Premier League will tell you that they are being very generous to the Football League and at one level they are being very generous, but the strings attached and the effect on the integrity of competition are both issues that cause me concern.

Q230 Dr Coffey: Roughly how much does the Football League now get from the Premier League?

Lord Mawhinney: Well, that is really quite a complicated question, if you do not mind me saying so.

Q231 Dr Coffey: Ballpark figure, is it £50 million?

Lord Mawhinney: We get solidarity payments. If the Premier League were here they would include all of the parachute payments that go to their clubs-

Dr Coffey: Just the solidarity-

Lord Mawhinney: No, I am trying to be helpful. The figures here are very easily misunderstood because the Premier League, up until the time I left, were saying they gave about £120 million a year to the Football League; but two thirds of that were parachute payments to their own clubs, they were not to us. About £25 million is what is sort of estimated comes to the Football League through the involvement of Premier League clubs in the Carling Cup, for which we are enormously grateful. There is some generation of money to Football League clubs from Premier League clubs in the context of transfers, though that has dropped off as the Premier League has shifted its gaze more toward Europe and the rest of the world than to the league below it. It is really quite hard to answer that question and I do not want to mislead you. You might want to ask each of the two leagues, add it together and work out an average.

Q232 Dr Coffey: The only reason I ask is that surely the Football League had come to its own arrangement by not including the parachute clubs in certain other redistribution of income within the League. I understand Middlesbrough is about to restructure because it has come to the end of its parachute, but is there an ongoing implication for viability of clubs leaving the Football League?

Lord Mawhinney: Dr Coffey, that is exactly the point that I was making about integrity of competition. If, in the Championship, you have two clubs each season going in with £16 million extra against the amount of money that goes partly from solidarity payments from the Premier League of about £2 million and the Football League allocation to a Championship club, which is about £2 million, you have two clubs with £16 million and the rest with £4 million. Next season there will be four with £16 million and 20 with £2 million and, if you believe what you have been hearing, money is what makes a football club successful. Personally, I think fans want sustainability as well as success but there is no doubt that the football industry mentality links money with success and that raises questions about integrity of competition.

Q233 Ms Bagshawe: This is a question that applies both to England and Scotland respectively. On the distribution among the individual Premier League clubs, and down to clubs below them, do you think that the situation is fair and equitable in terms of transfer payments and youth development payments? Do you think those individual payments have been handled properly, respectively?

Henry McLeish: On the last question, there are problems with parachute payments, as they are not sufficient. There is a different scale of costs, a different series of financial problems, so in Scotland the current reconstruction proposals are about creating an SPL2 or a kind of Championship type of league. That is going to involve more money coming from the SPL into that. Also they are seriously looking at a significant increase in parachute payments.

Overall, because of the lack of broadcasting income and the difficulties of sponsorship, we are dealing with more meagre budgets. So in that sense there isn’t really a dispute between the Scottish Football League and the Scottish Premier League about distributional aspects. It is more a joint league or a joint effort to try and get more money coming into the game overall.

But what we have done in my recent report is make some suggestions about the elite talent/youth development side, because in many senses we do not have the young players coming through. It is quite clear that within the SPL and within the SFL, the SPL in particular, the investment of young people is not bearing fruit to the extent it should. What we are looking at then is a wider pooling of both responsibility and resource across all the authorities, including the SFA, to try and tackle that particular problem. In that area, we are also seeking further investment from the Government as one of the leverage points, the very few leverage points they have, to do something for elite, talented young people, which would be in the national interests as a justification for involvement as well as to the benefit of the clubs.

Lord Mawhinney: As far as England is concerned, frankly you pay your money and you take your choice. The Premier League have a ladder system but their clubs voted for it. So I guess those who are toward the bottom end of the league don’t feel that the differential is so big as to create a problem. In the Football League there is equality of distribution within the division. Within the Premier League the effect of money generated through playing in the Champions League has a significantly more distorting effect in the context of your question than the ladder arrangement.

Q234 Mr Sanders: On these parachute payments, given the sort of scale that you have set out, the number of clubs that would be in the Championship with that financial backing, it occurs to me that if you are a League 1 club and you get promoted you are automatically at a disadvantage within that new league that you have entered and that there is then an incentive to overreach yourself if you are in the Championship, having come up rather than having come down. I am wondering if there isn’t a direct link between those parachute payments and the situation of Plymouth Argyle, at the moment in administration, who possibly overreached themselves, having gone up into the Championship and unable to compete with clubs that have those parachute payments.

Lord Mawhinney: You will forgive me if I don’t comment about a specific club. There are probably management and governance issues and all sorts of other things, so forgive me if I don’t do that. But as to the core question that you raise, it is a good one but, Mr Sanders, it is not just when a League 1 club goes up to the Championship. As part of the latest what is called solidarity package, I told you about the parachute payments and the just over £2 million a year to the Championship clubs, the other part of that package is that the League 1 clubs get £300,000 and the League 2 clubs get £200,000, give or take a few bob.

The very solidarity packet enhances the differential even before you get into the position of what happens to the promoted clubs. It is a real problem. If I had to identify one thing that I learned about football, I would talk about two things: I learned it was sometimes quite tricky to get all 72 chairmen pointing in the same direction at the same time, but the main lesson I learned was that if the Football League doesn’t defend the integrity of competition, absolutely nobody else will. The integrity of competition is, for me, easily the most important issue. It relates to sustainable debt; it relates to the behaviour of agents; it refers to transfer windows. There is a whole range of things that fall under the broad heading of "integrity of competition" and I very much hope, Chairman, that this is an issue that will commend itself to the Committee in fairly robust terms when you produce your report.

Henry McLeish: Can I just add a postscript? I think Lord Mawhinney is right in describing it as a closed market. You can take the clubs that occupy the Premier League in Scotland and say they are businesses, they are in a marketplace, but the operation of the League is not in a marketplace. I think that whether you call it solidarity or protectionism then you do find that there is a lot of problems peculiar to football that have developed over decades into the situation we have got. I don’t think, certainly in Scotland, they are anti-competitive in that regard. On the other hand, the precarious nature of relegation and promotion is such that there is no great outcry in Scotland about some of the excesses or perceived excesses of that process. As I said, more of a concern that if we can generate more cash from a better product on the pitch that would be the biggest objective to be pursued.

Q235 Mr Sanders: Can I ask you for a quick answer to this? You mentioned Celtic and Rangers, and that one of the reasons for not coming into the Premiership was the impact on the Scottish international position. But how does that work when you have Welsh teams playing in English leagues-possibly one of them going into the Premiership this year-and yet there is still a Welsh professional, semi-professional league, and a Welsh national team?

Henry McLeish: We have Berwick Rangers playing in the Scottish leagues as well, so we are quite friendly with our English colleagues on that. I raised it in reply to David Cairns’ point merely by saying that if two clubs of sufficient stature were to seek to move between international associations then I think it might ruffle a few feathers and, quite frankly you don’t have to do a great deal to ruffle the feathers of either UEFA and, in this case, it would be FIFA. I think there is a more serious point, which is that while David Cairns has quite rightly outlined the issue for Rangers and Celtic in a small league where attendances are not good, their competition is not sharpened every week. This is just the historical reality we find ourselves in. In terms of not agonising in a report or in discussions and dialogue about where Rangers and Celtic are going, they are part of Scottish football and I think that is how we want to deal with the problem.

Q236 Mr Sanders: Lord Mawhinney, can I ask about the Football League and whether it ought to be doing more to support and reward youth development programmes run by Conference clubs?

Lord Mawhinney: I have to be honest and say I don’t understand what the basis of the question would be. Most of the clubs that I had the privilege to represent think that they have a major task getting their own youth development programmes up and effective and defending, as is now commonly and widely reported in the media, the increasingly good youth development programme in the Football League against the sort of comments that you heard from the representatives of the Premier League who gave evidence earlier. On the whole, I think it would be reasonable to say that most of the Football League chairmen think that those two things constitute enough of a challenge on youth development without taking on the job of trying to handle youth development for the Conference.

Q237 Mr Sanders: So you think it ought to just be something for the league clubs to do? I mean league clubs have, as you hint, a difficult enough job maintaining a youth development programme. It is the first thing they tend to cut back when they are in money trouble. But shouldn’t it be something that League ought to look at right throughout the pyramid, that every club that is professional or semi-professional ought to be encouraged to have some form of youth development?

Lord Mawhinney: The answer to that question is undoubtedly yes. Thirteen of the England team who played recently against Denmark received most of their youth training in the Football League. We have, as Mr Clark and Mr Williamson, particularly, told you, a good and burgeoning system in the Football League for youth development. It is now under challenge by the Premier League-that will be a matter for the two leagues to sort out among themselves-but I am proud of the strides that have been made over the last seven years as far as youth development is concerned and that is not a bad English statistic.

Q238 Paul Farrelly: I want to just come on briefly to finances, but just on that strand on youth development. One of the things that has struck when I went to Germany was not so much the 50 plus one rule, because that can obviously be negotiated around, but it was a sense that they had an ethos in Germany that seems to be missing here, particularly vis-à-vis, the Premier League and the FA and the Football League. They said that when they lost very badly in Euro 2000 they decided collectively to do something about it and, in particular, youth development was strong. They put a strong emphasis on youth development. You have seen the results now with the young German team and their performance in the World Cup. Is there any sense that we can learn from Germany in youth development and developing that ethos, sharing some money in the game but making it in the national interest as well as the game’s interest and home-grown players? Is this a fruitful line of inquiry for us?

Lord Mawhinney: Yes, I think it probably is; perhaps in the context of whatever you may choose to say about the future of the FA. It is a matter of record that Trevor Brooking and I didn’t see eye to eye over youth development for years and we didn’t see eye to eye because our clubs were putting £40 million into youth development, the FA was putting in a minimal amount and they simply wanted us to hand over our £40 million and our young players and they would decide what to do with them. That never struck me as an attractive option but, in an attempt to be helpful, a few years ago I had Sir Trevor here for lunch and I invited him to take a clean piece of paper and write down what he would like from the Football League and I would do my very best to persuade the Board to deliver. I am guessing that was three years ago, maybe four years ago, and I was promised a reply within a week and it still hasn’t come.

Paul Farrelly: Maybe we can follow that up.

Henry McLeish: Can I just make a postscript, because I think this is one of the most important issues facing certainly Scotland and I have no reason to doubt that within the FA structures it is the same problem in England. We had listened to the SPL talking about youth development. We were clearly talking a good game but the delivery element was missing. What I think we had to rationalise there was that if we’re looking for young Scots to be nurtured, the talent they have, so they can appear with the clubs or internationally or with the Scottish team, we virtually had to remodel what we were doing. One of the things that we tried to do in this report was ask, if you look at everyone concerned in the game, what is the purpose of football in 2011? What is the national mission? Why should a Committee of the House of Commons want to be involved?

I think that the Chairman said when he launched this inquiry that he wanted some strategic involvement and to strengthen self-regulation, and essentially I thought that he was talking about the FA. If there is one broad area where there should be a growing consensus it is that we are not doing enough. If you look at some of the figures on coaching, and qualifications for coaching in either country, and then look at Portugal or Spain, you can see why at international level we are not doing well. At least you guys qualify; we rarely qualify these days. But, on the other hand, as to youth development, Germany is the classic example; they took it upon themselves to say this mustn’t happen again. So, therefore, in terms of procedures, finance, co-ordination and an integrated approach to youth and talent development, that is where we are now heading in Scotland, and it seems to me that that argument might be applicable here.

Lord Mawhinney: Our young people should go into proper training at a far younger age and the FA should shift away from making them play on full-size pitches and make them play on much smaller pitches, so that they can develop their skill base.

Q239 Jim Sheridan: Can I just ask a supplementary about youth development, particularly in Scotland? You did say earlier that the youth development programme has more or less failed. We are no longer producing the Billy Bremners of this world. There may be a simple or significant reason for that, I don’t know. One of the issues I have picked up, which is probably applicable to England as well, is that when youth clubs play the Old Firm in Scotland and a young boy shines, the Old Firm then take them away. While such a boy might shine in a moderate club, in among the Old Firm-with "superstars" as we call them-he might not shine, so he loses the game, the game loses him, and he just fades away. I wonder if there is anything that can be done to stop big clubs in England and, indeed, Scotland, from poaching these young players away.

Henry McLeish: I am sure the simple answer to Jim Sheridan’s comment would be no. On the other hand, however, what we have looked at again in Scotland under the duty of care issue is that-again looking to strengthen the capacity of the FA down here-we want to strengthen the capacity of the Scottish FA to have a duty of care. Therefore, we understand the competitive nature and if the youngster is excited by the prospect of going to Rangers or Celtic or Man United, parents often get involved and it is difficult to stop the process. On the other hand, the great wastage rate is approximately 95% of young people at the age that Jim Sheridan is talking about will go to a club and will never make it.

The tragedy about that is you could argue that people are not picking talent properly but a lot of these young people, children, youths, are lost to the game. Also, if they had been dealt with differently and more effectively at the local levels they may have sustained, developed later and still had a good career in football. We, again, as a part of the package of the recommendations on the duty of care issues, want the SPL, the SFL, the SFA to get together with also the wider youth development to make sure that opportunities are still available for children and families but-"constrained" is not the right word-they are conditioned by a better framework, which means there is more success and less wastage.

Lord Mawhinney: As far as England is concerned, the danger is if it is going in the opposite direction. If the new youth development proposals are enacted there will be four categories. The biggest clubs in the Premier League will be in the top category and they will be allowed to set up training arrangements in towns and cities all around the country, sometimes in competition with Premier League or, more likely, Football League clubs in the same town. So the direction of travel is being promoted as a new elite structure for developing kids but the danger is that it is going to go in exactly the opposite direction, Mr Sheridan, to what you have suggested.

Q240 Paul Farrelly: Let me just cover finance briefly. The figures are stark. In the last 18 years over half of Football League clubs have been subject to some form of insolvency and, Lord Mawhinney, under your tutelage, division 2 introduced some restrictions on wages. Do you think those have been successful and, if so, is there any prospect with such differing agendas that these or similar forms of financial control can be implemented up the pyramid in English football?

Lord Mawhinney: The problem with football is not lack of money. It is lack of cost control. You heard the Premier League chairmen talking about agents in the Football League a few years ago initiated the publishing of how much money each of our clubs gives every six months to agents. That has had an effect. We did the first ever deal, the only deal so far, with HMRC to ensure that we could work with HMRC and insist that our clubs pay their National Insurance and PAYE on time each month and stop using the Treasury as an unofficial bank. You were given some evidence earlier that I suspect is not totally right. It was right inasmuch as I think it was Mr Scholes who said the Premier League have a similar arrangement. They don’t. The clubs have to tell the Premier League but my understanding is the Premier League have not followed our lead in terms of coming to an arrangement with HMRC itself.

That was hugely important but there are other cost control issues. One of them, I guess, would be football creditors. I hate to say, Chairman, that I inherited a football league policy very supportive of the football creditor rule and when I left the football league policy was still very strongly in favour of the football creditors rule. We did debate it a number of times and I got outvoted every time in the Board, but my personal view is that it is not defensible. Mr Collins pursued my successor on this issue. If you will forgive me, I think you are absolutely right. I do not know how you defend the local community where local businesses that you are supposed to be the football club of don’t get paid for services rendered while a football club hundreds of miles away gets protected.

There is no doubt that the football creditor rule cranks up expenditure and you are right again to say that it would make far better due diligence if it didn’t exist and you persuaded my successor, while defending the football creditor rule, to say that he could see no moral basis for it. I share that view. I don’t think there is any moral basis for it. It may be of interest, Chairman, for the Committee to know that just before I left the chairmanship of the Football League made a charity donation to St John Ambulance of more than £40,000, purely as a charity donation, which covered all of the administration losses that the St John Ambulance had on its books that were outstanding as a result of clubs going into administration.

Henry McLeish: In Scotland the creditor rule applies, but it is not a major issue because there have been no particular problems with it at this stage.

Q241 David Cairns: Just on this issue in relation to Scotland you have a situation where one of the Old Firm clubs is essentially now controlled by the bank, not owned by the bank, and found itself in a situation where, in the transfer window, they had to sell their best player-possibly scuppering their chances of winning the league; of course, let’s hope they’re still in it-essentially because the bank told them to. If this isn’t a sign that there is a fundamental problem in how we are structuring the game then it’s hard to think of a bigger sign where the oldest, biggest, most successful club in Scotland is having to sell its best players because the bank is telling them to do so. If this isn’t making a case for fundamental change, what is?

Jim Sheridan: How bad is the indebtedness in Scotland?

Henry McLeish: The problem of indebtedness is significant, but let me put into context both points. The creditor rule is separate, in a way, because it’s an issue that is more closely linked between HMRC and the Scottish Premier League, in particular, and to how we deal with things. There has been a much closer coming together in dealing with financial issues and SPL itself under its new chairman has been very active in trying to make much more sense of the finance. But I have made no effort to try and disguise the fact today that the financial condition of Scottish football is not a good thing. In that sense, there are many, many examples that I could put forward. But what I think I would draw the Committee’s attention to as a piece of evidence is the PricewaterhouseCoopers’ annual report of financing of the Scottish Premier League, which is published every year, and 2010 was particularly interesting because I think it celebrated the 21st anniversary of that publication. So there is a lot of data going back over the period and reinforcing some of the concerns that have been expressed on both sides of the Committee room this morning.

Q242 Damien Collins: Lord Mawhinney, you have anticipated the question I was going to ask about the football creditor rule, so I won’t go to that ground; your answer to the Committee is very clear. I just wanted to pick up on what you said earlier about the integrity of competition with regard to the financial standing of the clubs. Do you think the Football League requires greater scrutiny of its member clubs, their financial performance, and maybe even moving to a scheme similar to what you see in Germany where clubs have to have their books effectively audited by the League to make sure that they can meet their obligations for the season ahead?

Lord Mawhinney: Mr Collins, the first thing we did was to recognise that when a club goes into administration, which the law of the land permits, it wipes out a whole bunch of debt and that gives it a competitive advantage over the other clubs in the division because, while they are having to use their resources to pay interest, the club that has gone into administration doesn’t. That is an integrity of competition issue and we addressed that by introducing the sporting sanctions and 10 point penalty, which the Premier League subsequently followed by nine points and the Conference followed as well. There is always a debate as to whether 10 points is the right amount or whether it would be better just to relegate a club; that is an ongoing debate, but we took serious action.

We have also, over the years, strengthened the financial reporting requirements of our clubs to the centre, and that is of some significance; as long as you bear in mind that the Football League, of which I can speak with some authority, is a trade association. We don’t run the clubs. It is the clubs that decide what the regulations will be and they have so far responded to providing more financial information, I guess. There may be a point at which they baulk and say we are going too far, but that hasn’t been reached yet.

Henry McLeish: I think reporting arrangements have been hugely improved in Scotland over the last three or four years. There was a period 2007/2008-and this is in the PricewaterhouseCoopers report-where some of the ratios, for example, of wages to turnover were just simply remarkable. A lot of effort has gone into trying to reign that back in. Reporting arrangements are much, much better and both the Scottish Football League and the Scottish Premier League have taken a much more hands-on approach to the individual clubs, especially if they are facing jeopardy or if there is a suspicion that there are concerns. The other interesting point in Scotland is that there is a better rapport between HMRC and the clubs than there has ever been. Slowly there is a realisation that a number of the issues that have been raised by yourselves today have been taken seriously because it is a protected market; but, on the other hand, you still have to have rules and regulations and parameters and all of the clubs now have acknowledged that has to happen.

Q243 Damien Collins: Lord Mawhinney, we have heard from other people, people in the Premier League, who concur with your observation that the problem with football is not lack of income but too great a level of expenditure. Most of that clearly goes on players’ salaries and transfer payments. Has the Football League ever discussed internally the structure of the competition and whether it would be better in terms of the financial viability for smaller clubs to go back to the old structure of a north and south bottom two divisions?

Lord Mawhinney: Yes, from time to time; but I have to say that there is no positive strength of feeling within the Football League to go back to that. I think partly because that would be perceived to be diminishing the status of the clubs. That is how the clubs would see it. So I don’t think that is going to happen.

Q244 Damien Collins: I just wanted to ask a final question relating to the structure of the FA and, within that, I would like to touch on the youth development questions that were raised earlier. Lord Mawhinney, I would be interested in your views on the structural reforms you think the FA should consider undertaking to make it a more effective governing body. With regard to youth development, there is the ongoing debate about the role of youth development. But some people would see that there was, I think, 2007 the Lewis report on youth development, which produced a lot of interest in it and it sort of went nowhere. Was that a failure of the structure of the FA to take that forward or was it the wrong report?

Lord Mawhinney: It was a failure of the structure of the FA. On the broader question, I think I was the first person in the management hierarchy of football in this country to say on the public record that I thought the FA was dysfunctional and that remains my view; though I want to put a caveat in by saying that I welcome the appointment of David Bernstein. I think he has the potential to initiate change across a wider front and I have made it clear to him that, although I am not actively involved anymore, if I can help him in any way I would be happy to do so.

But for the last few years the record of the FA is pretty terrible, to be honest. I know that the new chairman-there was an element of common ground in the earlier testimony, although there was a good deal of hedging going on-would like to have two non-executive directors appointed to the Board and I would support that if it was to happen. If Lord Burns had taken the advice of some of us before he produced his report we wouldn’t be here today, we would be having a different conversation; but he didn’t and he has now told you that he regrets he didn’t. I regret he didn’t, but he didn’t.

The big problem is that people should not assume that appointing two non-executive directors to the FA Board is going to solve the problems of the FA. The FA’s problems are much, much deeper and more radical than that. Lord Triesman was right; there is a poor relationship-and I use my diplomatic language because I am testifying before Parliament-between the FA and the Premier League. The council is among the more conservative bodies with which it has been my privilege to work in the last 30 years. There needs to be change in both of those areas and the FA needs to reassert its authority as FIFA’s representative in this country. It hasn’t for years, and I hope it will, but none of those three issues are going to be resolved by adding a couple of non-executive directors and making the board 14 instead of 12.

Henry McLeish: Just on the structure, some of the points I made earlier. Again I concur with Lord Mawhinney about the structural change but I think what we also do-and this was the Chairman’s initial context about improving self-regulation-you have to give the confidence and the capacity to the FA to do that. They have to win it back, in my regard. It is a similar problem in Scotland because the real question within the SFA was, "Well, what is our role?" A Premier League that is kind of there and doing a reasonably good job; an SFL, all the youth. I think they have grown in capacity, grown in confidence, they want to move forward.

The other issue is that it is from top to bottom. In Scotland what we have suggested, and hopefully you will read the report in detail, is to take things from the very council, on which I agree with the comments made, right through the Board structure, and we are talking about 12 to seven; we are talking about nine committees to two. In a sense, that is the structural issue; that is the armaments that they can use to deploy what they want to do. But the other thing is just changing the ethos and to me the confidence issue is absolutely sound because in Scotland now it is club, it is community and country. For far too long it seems to be the emphasis has been club, understandably. That is where the big players are, this is where the issues are. But in Scotland I think we are trying to say, "Okay, but there is a country issue," which is the thing we have talked about in terms of youth, and also to acknowledge that there is a community issue about getting some of our clubs on to different business models and different ideas of where we can go. Again, as Brian Mawhinney says, in relation to geography, they still want to be part of the heart of football. Therefore any suggestion of becoming a community club diminishes that; it is something they frown upon. You have got be careful in that.

Q245 Jim Sheridan: A major part of this inquiry is about the relationship between the support roles, the authorities, clubs, and so on, and you would have heard the Premier League’s response to the question about club ownership and should the fans know or not know who owns a club. I’d ask if you concur with that. Secondly, still on the question of supporters, if I can ask Henry, in particular, I know that the footballing authorities in Scotland are doing their best to try and improve the game, improve the product. But the popular press obviously the move to attain a team in a league is not very popular, so I wonder how the authorities in Scotland will square that circle if they are to genuinely listen to the fans?

Henry McLeish: On the latter point, there is this ongoing battle between what would be the best league structure financially. I mean in the report that I prepared I said that 10 made sense if you looked at the financial context, because what that means is 12 goes to 10, 10 take on board what 12 were getting and it is all about the broadcasting; it is all about the fans tripping down the league.

On the other hand the fans instinctively want bigger leagues because they are sick and tired of other clubs playing each other too many times. I am not sure how it is going to work out in Scotland because the SPL are still debating that particular issue, but I suspect they will probably end up with the 10. It still begs the question of what is the best model for Scottish football. Clearly, in the financial context, I think that may be the right one but it certainly doesn’t solve the fans’ problem.

Can I just say before Lord Mawhinney comes in, on the wider issue of fan base, I think things have improved in Scotland but for a lot of clubs the fans are welcome because they come through the turnstiles and they pay and they watch, and that is the fan base. But there has been a bit of a reluctance to involve the fans in a much more dramatic way. There are problems with that, especially if it is about fan takeover in terms of ownership of the Board. What I see in Scotland is that the Scottish Football League clubs, the 30 of them, will move to different models, as some of them are doing with community interest companies and so on. So there will be a bigger involvement of the fan base. They will be part and parcel of developing the club and, if they have access to resources, that might help that out. On the other hand, the clubs are desperate for resources anyway. So I see there are prospects there, but currently not a lot of progress has been made.

Lord Mawhinney: Football, in one respect, is quite bizarre. It is very difficult to keep a secret. I have had business appear on the media while the board meeting at which it was being discussed is still going.

Jim Sheridan: You’ve not a PLP as well?

Lord Mawhinney: Listen, tell me about it. Some of the most skilled exponents of that in the media are taking an interest in these proceedings. At one level it is very hard to keep a secret and yet there is, running through football, a huge secrecy non-transparent core. I remember, Mr Sheridan, when I went to see Geoff Thompson, then chairman of the FA, to tell him that the Football League was going to introduce a fit and proper person test, he told me I couldn’t do it because a fit and proper person was the remit of the FA and it wasn’t a league issue, and so I couldn’t do it. We had, what I guess is known even in here, a full and frank exchange of views and we did it. Then the Premier League followed us and then the FA did something. But the instinct is not to be open. For Members of Parliament that is harder to grasp but it is a reality.

You weren’t given the name, it is a law firm I believe. The Football League doesn’t use it because it can’t afford to, it doesn’t have the money. I was surprised that you weren’t simply told, "We are not going to publicise it because if we do we would have to publicise the rejections and that would open everybody to legal challenge and law suits and all the rest of it". That is a serious issue in the world of football. But we have been moving to transparency; publishing agents’ fees as I mentioned earlier was an example of transparency. My guess is that more will come over the years. I think this is unstoppable, but football is a very, very conservative-small "c"-industry and it moves slower than the average.

Q246 Dr Coffey: Building on what Mr Sheridan said, Lord Mawhinney and Mr McLeish, it is about the supporter and community ownership of football clubs. There haven’t been that many examples of where it has led to great success in terms of moving up the divisions. Do you think that the sentence that went in the coalition agreement was just, "Why is it there?" It is an interesting one and we are trying to offer something for the Government to respond to, but did we all just jump on a bandwagon last March, Labour party included, when they said they were going to arrange for everybody to be able to buy a stake in their club?

Lord Mawhinney: I can’t tell you why it is in the coalition agreement. I have no idea why they put it there and they certainly didn’t consult at least some of us who might have had a constructive thought. Just as, if you will forgive me saying so, I don’t think your manifesto probably was the result of deep consultation with the members of your party who might have been able to make a contribution. I don’t know why it is there.

York City was extremely important because the supporters trust in York City deserve an enormous amount of credit for saving that club from going out of business. I think that created an emotional environment and I think I am the first senior administrator in football who went and spoke at the supporters annual conference. But, given the present business model where so many clubs depend on the benevolence of rich people, supporters clubs are probably not the answer. But if and when football gets itself on a more sustainable basis without having to depend enormously on the beneficence of rich people or rich companies, then the supporters trust might become a more effective model-except that as Mr Williamson pointed out to you-and it has been our experience-supporters trusts pick a director, put him on the Board and then expect him to tell them or her to tell them what is going on at the club and, of course, fiduciary responsibilities stops that happening and it all ends in tears.

Henry McLeish: From my point of view, I think I agree with the latter point about the degree of tokenism that goes on in a very secretive football arena. That said, if you take Scotland, it seems to me that big progress will be made with the Scottish Football League clubs. There are 30 of them and there is a lot of enterprise, a lot of initiative. There is actually quite a lot of investment by the chairman in some clubs. But the main thing is they are trying to take the clubs forward in the sporting context.

I went to see the Sporting Club Lisbon just as a visit and what we are trying to get football to do, especially in those leagues, is to make sure they are interfacing with other sports as a community focus, as a community hub, as a sporting hub; again watching that they don’t feel they are being squeezed out of football, but at the end of the day, the different business model-and as I said, one of the business models is this Community Interest Company, the CIC, which allows, because of the structure and status of the organisation, for them to obtain finance and possibly obtain some grant funding that they wouldn’t have been able to get in their old classification as a public liability company. There is a lot on the move, but I think it needs encouragement. It is happening but it is going to happen very slowly.

Chair: The Rt Hon Lord Mawhinney, the Rt Hon Henry McLeish, thank you very much indeed for your evidence.


[1] Witness correction following the evidence session: Excluding the sale of Cristiano Ronaldo to Real Madrid CF for £80m in 2009.